Notes on the Nested Logit Demand Model

These notes derive formulas for the market shares, first derivatives, and second derivatives of the nested logit model. Section 1 examines on a one-level nesting structure, and Section 2 examines a two-level nesting structure. The notes were originally prepared as part of the Miller and Weinberg (2017) research project, 1 though they have proven useful in a number of other projects as well. We have prepared corresponding functions in R that return the market shares and derivatives given the structural parameters as inputs.