Analyzing consumers heterogeneity and self-reported tastes: An approach consistent with the consumer's decision making process

This paper analyses whether self-reported valuation of goods is an adequate proxy for underlying tastes. In this case, different self-reported appraisals, which we can associate with different utility functions, would imply different demand curves. To estimate these kinds of relationships we have used data on reported tastes on new film releases and cinema attendance. We have used a latent class approach in order to imitate the data generating process underlying the demand functions, where consumer's preferences are determined before consumers purchase. With this procedure we can reject the hypothesis of a unique demand function for all consumers. As expected, moreover, prices have a different influence depending on individuals' self-reported tastes and specific market policies for each consumer group could therefore be designed.