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Chapter 10. Logistic Regression > Logistic Regression Model

10.2. Logistic Regression Model

The logistic regression model is used in a variety of fields: whenever a structured model is needed to explain or predict categorical (in particular, binary) outcomes. One such application is in describing choice behavior in econometrics, which is useful in the context of the example above (see the accompanying box).

LOGISTIC REGRESSION AND CONSUMER CHOICE THEORY

In the context of choice behavior, the logistic model can be shown to follow from the random utility theory developed by Manski (1977) as an extension of the standard economic theory of consumer behavior. In essence, the consumer theory states that when faced with a set of choices, a consumer makes the choice that has the highest utility (a numerical measure of worth with arbitrary zero and scale). It assumes that the consumer has a preference order on the list of choices that satisfies reasonable criteria such as transitivity. The preference order can depend on the person (e.g., socioeconomic characteristics) as well as attributes of the choice. The random utility model considers the utility of a choice to incorporate a random element. When we model the random element as coming from a "reasonable" distribution, we can logically derive the logistic model for predicting choice behavior.



  

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