A MONTE-CARLO STUDY OF TESTS FOR THE INDEPENDENCE OF IRRELEVANT ALTERNATIVES PROPERTY

A plethora of tests for the Independence of Irrelevant Alternatives (I IA) property of Legit models of discrete choice behavior has been prop osed in the literature. These tests are based upon asymptotic argument s and little is known about their size and power properties in finite samples. This paper uses a Monte Carlo simulation study to investigate the size and power properties of six tests for IIA in the multinomial Legit model. Our results show that the majority of tests based upon p artitioning the choice set appear to have very poor size and power pro perties in small samples. Tests for IIA based upon the DOGIT model, si milarly have poor size properties, but in some circumstances do have r easonable power properties.