Consumer Choice Models and Estimation: A Review and Extension

Forthcoming in Production and Operations Management

53 Pages Posted: 8 Jul 2021

See all articles by Qi Feng

Qi Feng

Mitchell E. Daniels, Jr School of Business, Purdue University

J. George Shanthikumar

Purdue University - Krannert School of Management

Mengying Xue

International Institute of Finance, School of Management, University of Science and Technology of China

Date Written: July 2, 2021

Abstract

Choice models are widely applied in psychology, economics, transportation, marketing and operations studies. We review the existing developments on the modeling of consumers' choices, including the attraction model, the utility-based model, the temporal model, and the rank-based model. The relationships among different classes of structural models are established and analyzed. Moreover, an operational data analytics (ODA) framework is presented to estimate the general consumer choice model using data. This framework, generalizing the existing estimation methods for specific structural models, strikes a delicate balance between the (likely imprecise) structural knowledge and the data. This is achieved by articulating the domain of validation through extending the structural knowledge and by formulating the data-integration model based on the associated structural properties. We demonstrate the implementation of the ODA framework to identify the appropriate consumer choice models. The ODA estimate outperforms the existing parametric and nonparametric methods, particularly over the choice sets that are not covered in the data. We also discuss potential future research of developing ODA approaches to study the related aspects of consumer choice models.

Keywords: Consumer Choice, Operational Data Analytics, Data Integration, Operational Statistics, Validation Mode

Suggested Citation

Feng, Qi and Shanthikumar, J. George and Xue, Mengying, Consumer Choice Models and Estimation: A Review and Extension (July 2, 2021). Forthcoming in Production and Operations Management, Available at SSRN: https://ssrn.com/abstract=3880844

Qi Feng (Contact Author)

Mitchell E. Daniels, Jr School of Business, Purdue University ( email )

403 Mitch Daniels Blvd.
West Lafayette, IN 47907
United States

J. George Shanthikumar

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Mengying Xue

International Institute of Finance, School of Management, University of Science and Technology of China ( email )

Hefei, Anhui
China

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