Revealing Additional Dimensions of Preference Heterogeneity in a Latent Class Mixed Multinomial Logit Model

Latent class models offer an alternative perspective to the popular mixed logit form, replacing the continuous distribution with a discrete distribution in which preference heterogeneity is captured by membership of distinct classes of utility description. Within each class, preference homogeneity is usually assumed (i.e., fixed parameters), although interactions with observed contextual effects are permissible. A natural extension of the fixed parameter latent class model is a random parameter latent class model which allows for another layer of preference heterogeneity within each class. This paper sets out the random parameter latent class model, building on the fixed parameter latent class model, and illustrates its applications using a stated choice data set on alternative freight distribution attribute packages pivoted around a recent trip in Australia.