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Distinguishing taste variation from error structure in discrete choice data

  • Swait, Joffre
  • Bernardino, Adriana

We propose as a practice that researchers investigate other sources of heterogeneity besides taste variation in the search for parsimonious recommendations about new product development and marketing program design. Some evidence exists that regularities in choice processes may be more common than previously thought (Louviere and Swait, 1996, Louviere et al., 1999; see also Stigler and Becker, 1977). In fact, it may be that taste homogeneity is more prevalent than expected, if we recognize other sources of heterogeneity properly. In this paper we show how discrete choice models confound taste heterogeneity and differences in error structure. We then illustrate the use of the Tree Extreme Value (TEV) model to investigate taste homogeneity in three trans-oceanic air travel markets, while controlling for error structure heterogeneity. We conclude that partial taste homogeneity exists across the markets, despite accentuated cultural differences; in addition, two of the routes exhibit a much higher degree of taste homogeneity, despite a significant difference in trip length.

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Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

Volume (Year): 34 (2000)
Issue (Month): 1 (January)
Pages: 1-15

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Handle: RePEc:eee:transb:v:34:y:2000:i:1:p:1-15
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  1. Wagner A. Kamakura & Byung-Do Kim & Jonathan Lee, 1996. "Modeling Preference and Structural Heterogeneity in Consumer Choice," Marketing Science, INFORMS, vol. 15(2), pages 152-172.
  2. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
  3. Goodwin, Cathy & Verhage, Bronislaw J., 1989. "Role perceptions of services: A cross-cultural comparison with behavioral implications," Journal of Economic Psychology, Elsevier, vol. 10(4), pages 543-558.
  4. Swait, Joffre & Ben-Akiva, Moshe, 1987. "Incorporating random constraints in discrete models of choice set generation," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 91-102, April.
  5. Swait, Joffre & Ben-Akiva, Moshe, 1987. "Empirical test of a constrained choice discrete model: Mode choice in São Paulo, Brazil," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 103-115, April.
  6. Bhat, Chandra R., 1995. "A heteroscedastic extreme value model of intercity travel mode choice," Transportation Research Part B: Methodological, Elsevier, vol. 29(6), pages 471-483, December.
  7. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  8. Daly, Andrew, 1987. "Estimating "tree" logit models," Transportation Research Part B: Methodological, Elsevier, vol. 21(4), pages 251-267, August.
  9. Steckel, Joel H & Vanhonacker, Wilfried R, 1988. "A Heterogeneous Conditional Logit Model of Choice," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 391-98, July.
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