Discrete Choice in Marketing through the Lens of Rational Inattention

57 Pages Posted: 15 Aug 2023

See all articles by Sergey Turlo

Sergey Turlo

Goethe University Frankfurt - Department of Marketing

Matteo Fina

Goethe University Frankfurt - Department of Marketing

Johannes Kasinger

Tilburg School of Economics and Management, Tilburg University; Leibniz Institute for Financial Research SAFE

Arash Laghaie

Nova School of Business and Economics

Thomas Otter

Goethe University Frankfurt - Department of Marketing

Date Written: August 3, 2023

Abstract

Models derived from random utility theory represent the workhorse methods to learn about consumer preferences from discrete choice data. However, a large body of literature documents various behavioral patterns that cannot be captured by basic random utility models and require different non-unified adjustments to accommodate these patterns. In this article, we propose an empirical rational inattention model for the analysis of discrete choice among multiple alternatives described along multiple attributes, as encountered in prototypical discrete choice experiments and choice-based-conjoint analysis in marketing and economics. We demonstrate empirical identification of the proposed model. Further, we illustrate how it naturally motivates stylized empirical results that are hard to reconcile from a random utility perspective, while contrasting it to extant approaches such as consumer search.

Keywords: choice modeling, rational inattention, conjoint analysis, discrete choice experiments

JEL Classification: C00, C35, D83, M31

Suggested Citation

Turlo, Sergey and Fina, Matteo and Kasinger, Johannes and Laghaie, Arash and Otter, Thomas, Discrete Choice in Marketing through the Lens of Rational Inattention (August 3, 2023). Available at SSRN: https://ssrn.com/abstract=4530519 or http://dx.doi.org/10.2139/ssrn.4530519

Sergey Turlo (Contact Author)

Goethe University Frankfurt - Department of Marketing ( email )

Matteo Fina

Goethe University Frankfurt - Department of Marketing ( email )

Johannes Kasinger

Tilburg School of Economics and Management, Tilburg University ( email )

Warandelaan 2
Tilburg, Brabant 5037 AB
Netherlands

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Arash Laghaie

Nova School of Business and Economics ( email )

Rua da Holanda 1
Carcavelos, 2775-405
Portugal

Thomas Otter

Goethe University Frankfurt - Department of Marketing ( email )

Frankfurt
Germany
++49.69.798.34646 (Phone)

HOME PAGE: http://www.marketing.uni-frankfurt.de/index.php?id=97?&L=1

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