Hierarchical Bayes

An estimation technique. It is particularly useful when estimating Mixture Models such as the Mixed Multinomial Logit Model. This is commonly used to estimate utilities in MaxDiff and Choice Modeling experiments.

At a high-level, Hierarchical Bayes uses a technique called Markov Chain Monte Carlo (MCMC) to estimate the parameters, which involves running a number of iterations where estimates of the parameters are generated at each iteration. This iterative sampling of parameters forms what is known as a Markov Chain. The samples are generated from those in the previous iteration using a set of rules. The rules are such that once sufficient iterations have been run and the initial samples are discarded, the distribution of the samples matches the posterior distribution of the parameters given prior distributions and observations. Formally, a chain is considered to have converged when the sampler reaches stationarity, which is when all samples (excluding the initial samples) have the same distribution.