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Why are market simulations based on disaggregate (HB utilities)less susceptible to the IIA problem?

Why are market simulation models based on disaggregate (HB utilities)less susceptible to IIA difficulties than aggregate logit.
asked Jun 5, 2014 by anonymous

2 Answers

0 votes
We addressed that specific question with numeric examples in the white paper: http://www.sawtoothsoftware.com/downloadPDF.php?file=benefits.pdf

Although that white paper refers first to latent class results and then  to an older method for obtaining individual-level utilities (ICE), the same issues apply for HB in terms of reducing the IIA troubles.
answered Jun 5, 2014 by Bryan Orme Platinum Sawtooth Software, Inc. (144,240 points)
Thank you!
0 votes
With individual-level utilities, we are able to pick up on a lot of heterogeneous information that we can't pick up on in the aggregate simply because we are throwing less information away with HB.  The data has a lot more 'texture' to is since we are letting each individual be their own 'voice'.

On an individual level, they still have the IIA property, but when you take hundreds of respondents behaving similarly in the face of two similar alternatives, the aggregate of that simulation starts to reflect the substitutability of like-alternatives.  

Aggregate logit doesn't really give you this kind of flexibility since you basically assume that any difference in opinion or discrepancy in responses in is just due to respondent error, which by comparison to HB is very very strict.
answered Jun 5, 2014 by Kenneth Fairchild Bronze Sawtooth Software, Inc. (3,295 points)
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