PHD Muppet (Transport Demand Modelling: Discrete Choice Model - Logit)

Question 1

What is Utility?

Answer 1

The perceived ability of something to satisfy the needs or wants
Represents satisfaction experienced by the consumer of a good

Question 2

What is the Utility Maximisation Principle?

Answer 2

• It is assumed that people choose the alternative that has the highest perceived utility for them
• Since the perceived utilities are not exactly known, the choice models incorporate an error term that accounts for stochasticity of choices
• Different choice models are different on how they treat these error terms

Question 3

What do Logit models assume?

Answer 3

That error terms are independent, identically, and Gumbel distributed

Question 4

What is Maximum Likelihood Estimation (MLE)?

Answer 4

MLE searches among all possible values of utility coefficients and finds the ones that best describes the choice observations (highest likelihood)

Question 5

What is likelihood?

Answer 5

Likelihood of a sample is the product of likelihood of individual observations in a sample