[Limdep Nlogit List] interpreting elasticities

[Bill Spitz]

I'm estimating a conditional logit model with 4 alternatives. I've included an alternative-specific income variable, and I understand that I must normalize on one of the alternatives, so there are only 3 such income variables in the specification.  My question is how to interpret the reported elasticities for these variables.

Assuming the normalization is on Alternative #4, what does an own-elasticity of, say 0.8 reported for Alternative #1 mean? Standard interpretation would be that a 1% change in income leads to a 0.8% change in the probability of selecting Alt 1. But who does this apply to? All consumers? Only those who have selected Alt 1?

And how does the interpretation relate to the normalized alternative? Should the interpretation be that a 1% change in income leads to a 0.8% change in the RELATIVE probability of selecting Alt 1 over Alt 4?

Thanks in advance.

/Bill Spitz


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