Two Level Nested and Sequential Logit

Davide Luparello

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arXiv · 2503.21808

Two Level Nested and Sequential Logit

Davide Luparello

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Abstract

This technical note provides comprehensive derivations of fundamental equations in two-level nested and sequential logit models for analyzing hierarchical choice structures. We present derivations of the Berry (1994) inversion formula, nested inclusive values computation, and multi-level market share equations, complementing existing literature. While conceptually distinct, nested and sequential logit models share mathematical similarities and, under specific distributional assumptions, yield identical inversion formulas-offering valuable analytical insights. These notes serve as a practical reference for researchers implementing multi-level discrete choice models in empirical applications, particularly in industrial organization and demand estimation contexts, and complement Mansley et al. (2019).

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Davide Luparello. 2025-03-25. Two Level Nested and Sequential Logit. https://arxiv.org/abs/2503.21808

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