Joint Decisions in Residential Choice

Abstract

Economic agents frequently make joint decisions, which often require a compromise by some or all of the participants. We propose an econometric model in which groups of agents make a joint decision; each agent has preferences modelled using a combination of multi-nominal logit and conditional logit parts. We combine these marginal preferences to create a joint set of probabilities of the group making a particular choice, which enables parameter estimation by maximum likelihood. We can also make the weight applied to an individual agents preferences depend on characteristics of the agent or group. To demonstrate the use of the model, data is obtained from the New Zealand Household Travel Survey. We estimate our model to show how households might make the joint decision of where to live, given that different household members have different work locations.