On the Distinction between Consideration and Utility
43 Pages Posted: 6 May 2014 Last revised: 21 Aug 2018
Date Written: August 20, 2018
We investigate the distinction between consideration and utility in a context where consumers not only optimize which brand to choose, but also how much to choose from each brand. We show analytically how utility maximization in quantities based on twice-continuously differentiable utility functions motivates the distinction between consideration and utility. We also explain how drivers of consideration may spuriously appear to exert a negative influence on demand when included as covariates to expected utility, resulting in models that lack face validity as a basis for decision making. We illustrate our theoretical arguments using data from a choice experiment designed to measure the influence of shelf-facings on demand.
Keywords: Two-stage decisions, consideration-sets, discrete-continuous demand, data augmentation, hierarchical Bayes
JEL Classification: C11, C51, M31, M37
Suggested Citation: Suggested Citation