Incorporating Context Effects into a Choice Model

Journal of Marketing Research, 2010

54 Pages Posted: 29 Jun 2013

See all articles by Robert P. Rooderkerk

Robert P. Rooderkerk

Rotterdam School of Management, Erasmus University

Harald J. van Heerde

Massey University - Dept of Communication, Journalism & Marketing

Tammo H.A. Bijmolt

University of Groningen - Department of Marketing & Marketing Research

Date Written: December 9, 2010

Abstract

The behavioral literature provides ample evidence that consumer preferences are partly driven by the context provided by the set of alternatives. Three important context effects are the compromise, attraction, and similarity effect. As these context effects affect choices in a systematic and predictable way, it should be possible to incorporate them in a choice model. However, the literature does not offer such a choice model. This study fills this gap by proposing a discrete-choice model that decomposes a product’s utility into a context-free partworth utility and a context-dependent component capturing all three context effects. Model estimation results on choice-based conjoint data concerning digital cameras provide convincing statistical evidence for context effects. The estimated context effects are consistent with the predictions from the behavioral literature, and accounting for context effects leads to better predictions both in and out-of-sample. To illustrate the benefit from incorporating context effects in a choice model, the authors illustrate how firms could utilize the context sensitivity of consumers to design more profitable product lines.

Keywords: context effects, behavioral decision making, choice models, hierarchical bayes, product line design

JEL Classification: M31, C25

Suggested Citation

Rooderkerk, Robert P. and van Heerde, Harald J. and Bijmolt, Tammo H.A., Incorporating Context Effects into a Choice Model (December 9, 2010). Journal of Marketing Research, 2010, Available at SSRN: https://ssrn.com/abstract=2286617

Robert P. Rooderkerk (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/people/robert-rooderkerk/

Harald J. Van Heerde

Massey University - Dept of Communication, Journalism & Marketing ( email )

Dept of Communication, Journalism & Marketing
Private Box 756
Wellington, 6140
New Zealand

Tammo H.A. Bijmolt

University of Groningen - Department of Marketing & Marketing Research ( email )

Nettelbosje 2
Groningen, 9747 AE
Netherlands

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