A rational random behaviour model of choice

Wilfried R. Vanhonacker and Russell S. Winer

Applied Stochastic Models and Data Analysis, 1990, vol. 6, issue 1, 41-52

Abstract: In this paper, a multinomial‐Dirichlet‐geometric model of consumer brand choice is developed. This individual‐level stochastic choice model is derived as an extension of Theil's theory of rational random behaviour. These behavioural assumptions permit modelling of changes in likelihood of purchase as consumers are confronted with environmental factors whose occurrence and exact nature could not be anticipated at the planning stage of a shopping trip. Moreover, the model allows for uncertainties about future events which might affect actual choice to be built into the choice process alongside a traditional choice model which reflects preferences and/or utilities (and potential uncertainties surrounding them). Empirical results using consumer diary purchase panel data indicate a strong superiority of the model developed compared with previous models which assume stationary preference vectors.

Date: 1990
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https://doi.org/10.1002/asm.3150060105

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Persistent link: https://EconPapers.repec.org/RePEc:wly:apsmda:v:6:y:1990:i:1:p:41-52

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