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A Monte Carlo experiment to analyse the curse of dimensionality in estimating random coefficients models with a full variance-covariance matrix

Lookup NU author(s): Professor Elisabetta Cherchi

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Abstract

When the dimension of the vector of estimated parameters increases, simulation based methods become impractical, because the number of draws required for estimation grows exponentially with the number of parameters. In simulation methods, the lack of empirical identification when the number of parameters increases is usually known as the ‘‘curse of dimensionality’’ in the simulation methods. We investigate this problem in the case of the random coefficients Logit model. We compare the traditional Maximum Simulated Likelihood (MSL) method with two alternative estimation methods: the Expectation–Maximization (EM) and the Laplace Approximation (HH) methods that do not require simulation. We use Monte Carlo experimentation to investigate systematically the performance of the methods under different circumstances, including different numbers of variables, sample sizes and structures of the variance–covariance matrix. Results show that indeed MSL suffers from lack of empirical identification as the dimensionality grows while EM deals much better with this estimation problem. On the other hand, the HH method, although not being simulation-based, showed poor performance with large dimensions, principally because of the necessity of inverting large matrices. The results also show that when MSL is empirically identified this method seems superior to EM and HH in terms of ability to recover the true parameters and estimation time.

Publication metadata

Author(s): Cherchi E, Guevara CA

Publication type: Article

Publication status: Published

Journal: Transportation Research Part B: Methodological

Year: 2012

Volume: 46

Issue: 2

Pages: 321-332

Print publication date: 01/02/2012

Online publication date: 15/12/2011

ISSN (print): 0191-2615

ISSN (electronic): 1879-2367

Publisher: Elsevier

URL: https://doi.org/10.1016/j.trb.2011.10.006

DOI: 10.1016/j.trb.2011.10.006

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