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Behavioral frontiers in choice modeling

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Abstract

We review the discussion at a workshop whose goal was to achieve a better integration among behavioral, economic, and statistical approaches to choice modeling. The workshop explored how current approaches to the specification, estimation, and application of choice models might be improved to better capture the diversity of processes that are postulated to explain how consumers make choices. Some specific challenges include how to capture and parsimoniously describe heterogeneous mixes of heuristic choice rules, methods for building realistic models of choice, and nontraditional methods for estimating models. An agenda for important future work in these areas is also proposed.

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Notes

  1. For important exceptions, see Kivetz et al. (2004) and Tversky and Simonson (1993).

  2. A good deal of the discussion in this Workshop concerned ideas which have not yet made their way into published papers. One of the most valuable aspects of this Workshop was the opportunity to hear some of the details of what our colleagues were just beginning to think about, rather than limiting the discussion to research which has already navigated the publication process. To afford some minimal protection to each individual’s proprietary rights to these ideas, we quote unpublished ideas and general expert intuition with attribution, wherever possible (even though this may go against the conventions observed in more standard journal articles).

  3. Some progress has also been made recently in addressing this concern via EBA models (see Batsell et al. 2003).

  4. This is true of conventional conditional logit-type models, although lexicographic and EBA-type models, of course, depart from this assumption.

  5. The “Lucas critique” warns against the use of econometrically estimated models to evaluate policy proposals when the behavior of individuals is conditional on the proposed policy. This advice is based upon the argument that changes in the exogenous variables in a structural model can precipitate changes in the parameters of that model, a form of dependence that is assumed away in most econometric specifications.

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Correspondence to Jordan Louviere.

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Adamowicz, W., Bunch, D., Cameron, T.A. et al. Behavioral frontiers in choice modeling. Mark Lett 19, 215–228 (2008). https://doi.org/10.1007/s11002-008-9038-1

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