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RE: st: nested logit tree

From   Solon Moreira <>
To   "" <>
Subject   RE: st: nested logit tree
Date   Mon, 28 Nov 2011 17:33:59 +0100

Hi Sergio,

Thanks for your email. In fact I want a decision model that has 4 possible outcomes: a buyer with R&D, a buyer without R&D, a supplier with R&D and a supplier without R&D. So in the end I have 4 possible alternatives in my data. I had a look in the restaurant data, but it is not exactly what I want, I think I need 2 levels. I could also calculate different logit models but I am not sure that is the best solution. I am expecting that the effect of some of my covariates will have a different direction in affecting the likelyhood of a firm having R&D or not depending on the side of the market that it it (buyer of supplier).


From: [] On Behalf Of Alvarez,Sergio []
Sent: Monday, November 28, 2011 5:02 PM
Subject: Re: st: nested logit tree


I may be misunderstanding, but it looks like you want to model a
decision which has only two possible outcomes: firm is a supplier or
firm is a buyer.  If that is the case, you probably should use a probit
or logit rather than a nested logit.
You can also model whether the firm has an R&D department (yes or no)
using a similar approach.

The nested and conditional logits are used when you have an agent (a
firm) making a choice among many alternatives (more than two).

Take a look at the restaurant.dta sample dataset and the nlogit help
file and it will become clear.



On Mon, 28 Nov 2011 14:39:19 +0100, Solon Moreira wrote:
> Dear Stata list readers,
> This is a question regarding the way that I should structure the tree
> of a nested logit model to get the right output.
> I have a dataset consisting of 1200 firms that buy and sell
> technologies. I am trying to run a model in which in the first level
> I
> can observe how firm-specific variables affect the likelihood of
> being
> a supplier instead of a buyer. The way that my model is structured
> now
> this part of the nest is shown in my stata output with no problem.
> However, I am having problem with my second level, I would like the
> output to show how some alternative specific variables affect the
> likelihood that buyers and suppliers will have an R&D department. So,
> I want to produce an output in which the first level explains the
> likelihood of being a buyer or a supplier and second level the
> likelihood that the buyer will or not have an R&D department and the
> supplier will or not have an R&D department. As I mentioned, I am
> able
> to produce an output in which I can observe the first level, but in
> the second level instead of comparing buyers that have R&D with
> buyers
> that do not have it (and the same wit!
>  h suppliers), my output shows all the 4 final alternatives in the
> same model, taking one of them as the baseline.
> That is the command I am using to build the tree:
> nlogitgen r&d= final_outcome(buyer_n: 1, buyer_w: 2, supplier_n: 3,
> supplier_w: 4)
> nlogitgen buyer_or_supplier= r&d(buyer: buyer_n | buyer_w , supplier:
> supplier_n | supplier_w)
> I could not figure out a way to compare only buyers with and without
> R&D and suppliers with and without R&D in the second level.
> Any suggestions are more than welcome
> Very best,
> Solon
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Sergio Alvarez
Food and Resource Economics
University of Florida
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