MBI-ETC07 TRANSP-OR TALK Fosgerau, Mogens Bierlaire, Michel Discrete choice models with multiplicative error terms 2007 European Transport Conference Leeuwenhorst, The Netherlands October 17, 2007 The conditional indirect utility of many random utility maximization (RUM) discrete choice models is specified as a sum of an index V depending on observables and an independent random term P. In general, the universe of RUM consistent models is much larger, even fixing some specification of V due to theoretical and practical considerations. In this paper, we explore an alternative RUM model where the summation of V and E is replaced by multiplication. This is consistent with the notion that choice makers may sometimes evaluate relative differences in V between alternatives rather than absolute differences. We develop some properties of this type of model and show that in several cases the change from an additive to a multiplicative formulation, maintaining a specification of V, may lead to a large improvement in fit, sometimes larger than that gained from introducing random coefficients in V. (C) 2008 Elsevier Ltd. All rights reserved.