Events

Mr. Arash Laghaie
Ph.D. Candidate in Quantitative Marketing
Goethe University Frankfurt

The hypothetical nature of choices collected in typical discrete choice experiments (DCEs) for market research has been a source of concern for both researchers in academia and industry. To the extent that processing the information in choice sets requires effort, classical economic theory questions the external validity of inferences from standard hypothetical (HYP) choices as elicited in market research. Recent studies in marketing indeed demonstrate increased external validity of inferences from choices that are properly incentivized (ICA). However, these studies model the difference between HYP and ICA data collected from the same population as if preferences change. Together, the classical economists’ critique of inference from HYP-DCEs and the notion of changing preferences has led to ignoring the information in HYP data when ICA data are available. In this paper we propose a model that links the information in HYP and ICA data collected in the same population. The model we propose is in the class of sequential-sampling models of choice and assumes that ICA leads respondents to increase their decision effort relative to the standard HYP market research setting, but subject to the same set of “deep” preference parameters. We show that increased amounts of cognitive processing under incentive-alignment materially and plausibly change choice probabilities and outcomes in our model, even if underlying, deep preference parameters are invariant. Our model yields a framework that parsimoniously bridges between data from HYP-DCEs and data from ICA-DCEs that potentially decreases data collection cost at the same level of external predictive validity.