Advertisement

Business Research

, Volume 1, Issue 2, pp 220–237 | Cite as

Incorporating Latent Variables into Discrete Choice Models — A Simultaneous Estimation Approach Using SEM Software

  • Dirk TemmeEmail author
  • Marcel Paulssen
  • Till Dannewald
Open Access
Article

Abstract

Integrated choice and latent variable (ICLV) models represent a promising new class of models which merge classic choice models with the structural equation approach (SEM) for latent variables. Despite their conceptual appeal, applications of ICLV models in marketing remain rare. We extend previous ICLV applications by first estimating a multinomial choice model and, second, by estimating hierarchical relations between latent variables. An empirical study on travel mode choice clearly demonstrates the value of ICLV models to enhance the understanding of choice processes. In addition to the usually studied directly observable variables such as travel time, we show how abstract motivations such as power and hedonism as well as attitudes such as a desire for flexibility impact on travel mode choice. Furthermore, we show that it is possible to estimate such a complex ICLV model with the widely available structural equation modeling package Mplus. This finding is likely to encourage more widespread application of this appealing model class in the marketing field.

Keywords

Hybrid choice models Mode choice Mplus Value-attitude hierarchy 

References

  1. Anderson, James C. and David W. Gerbing (1988): Structural equation modeling in practice: A review and recommended two-step approach, Psychological Bulletin, 103 (3): 411–423.CrossRefGoogle Scholar
  2. Andrews, Rick L., Andrew Ainslie, and Imran S. Currim (2002): An empirical comparison of logit choice models with discrete versus continuous representations of heterogeneity, Journal of Marketing Research, 39 (4): 479–487.CrossRefGoogle Scholar
  3. Ashok, Kalidas, William R. Dillon, and Sophie Yuan (2002): Extending discrete choice models to incorporate attitudinal and other latent variables, Journal of Marketing Research, 39 (1): 31–46.CrossRefGoogle Scholar
  4. Bagozzi, Richard P. (1980): Causal models in marketing, John Wiley & Sons: New York.Google Scholar
  5. Bagozzi Richard P. and Youjae Yi (1988): On the evaluation of structural equation models, Journal of the Academy of Marketing Science, 16 (1): 74–94.CrossRefGoogle Scholar
  6. Bamberg, Sebastian (1996): Allgemeine oder spezifische Einstellungen bei der Erklärung umweltschonenden Verhaltens? [General or specific attitudes as predictors of environmentally friendly behavior?], Zeitschrift für Sozialpsychologie, 27 (1): 47–60. (in German)Google Scholar
  7. Bamberg, Sebastian and Peter Schmidt (1994): Auto oder Fahrrad? Empirischer Test einer Handlungstheorie zur Erklärung der Verkehrsmittelwahl [Car or bicycle? An empirical test of a behavioral theory on travel mode choice], Kölner Zeitschrift für Soziologie und Sozialforschung, 46 (1): 80–102. (in German)Google Scholar
  8. Bamberg, Sebastian and Steffen Kühnel (1998): Überzeugungssysteme in einem zweistufigen Modell rationaler Handlungen [Systems of conviction in a two-stage model of rational behavior], Zeitschrift für Soziologie, 27 (4): 256–270. (in German)Google Scholar
  9. Bardi, Anat and Shalom H. Schwartz (2003): Values and behaviour: Strength and structure of relations, Personality and Social Psychology Bulletin, 29 (10): 1207–1220.CrossRefGoogle Scholar
  10. Ben-Akiva, Moshe and Steven R. Lerman (1985): Discrete choice analysis: Theory and application to travel demand, Cambridge: MIT Press.Google Scholar
  11. Ben-Akiva, Moshe, Mark Bradley, Taka Morikawa, Julian Benjamin, Thomas Novak, Harmen Oppewal, and Vithala Rao (1994): Combining revealed and stated preferences data, Marketing Letters, 5 (4): 335–349.CrossRefGoogle Scholar
  12. Ben-Akiva, Moshe, Daniel McFadden, Tommy Gärling, Dinesh Gopinath, Joan Walker, Denis Bolduc, Axel Börsch-Supan, Philippe Delquié, Oleg Larichev, Taka Morikawa, Amalia Polydoropoulou, and Vithala Rao (1999): Extended framework for modeling choice behavior, Marketing Letters, 10 (3): 187–203.CrossRefGoogle Scholar
  13. Ben-Akiva, Moshe, Daniel McFadden, Kenneth Train, Joan Walker, Chandra Bhat, Michel Bierlaire, Denis Bolduc, Axel Börsch-Supan, David Brownstone, David S. Bunch, Andrew Daly, Andre De Palma, Dinesh Gopinath, Anders Karlstrom, and Marcela A. Munizaga (2002): Hybrid choice models: Progress and challenges, Marketing Letters, 13 (3): 163–175.CrossRefGoogle Scholar
  14. Ben-Akiva, Moshe, Joan Walker, Adriana T. Bernardino, Dinesh A. Gopinath, Taka Morikawa, and Amalia Polydoropoulou (2002): Integration of choice and latent variable models, in: Hani S. Mahmassani (ed.): In perpetual motion: Travel behaviour research opportunities and application challenges, Elsevier, Amsterdam, 431–470.Google Scholar
  15. Bolduc, Denis, Moshe Ben-Akiva, Joan Walker, and Alain Michaud (2005): Hybrid choice models with logit kernel: Applicability to large scale models, in: Martin Lee-Gosselin and Sean T. Doherty (eds.): Integrated land-use and transportation models, Elsevier, Amsterdam, 275–302.Google Scholar
  16. Boomsma, Anne and Jeffrey J. Hoogland (2001): The robustness of LISREL modeling revisited, in: Robert Cudeck, Steven du Toit, and Dag Sörbom (eds.): Structural equation models: Present and future. A Festschrift in honor of Karl Jöreskog, Scientific Software International, Lincolnwood, IL, 139–168.Google Scholar
  17. Choo, Sangho and Patricia L. Mokhtarian (2004): What type of vehicle do people drive? The role of attitude and lifestyle in influencing vehicle type choice, Transportation Research Part A: Policy and Practice, 38 (3): 201–222.Google Scholar
  18. Collins, Christy M. and Susan M. Chambers (2005): Psychological and situational influences on commuter-transport-mode-choice, Environment and Behavior, 37 (5): 640–661.CrossRefGoogle Scholar
  19. Dellaert, Benedict G. C. and Stefan Stremersch (2005): Marketing mass-customized products: Striking a balance between utility and complexity, Journal of Marketing Research, 42 (2): 219–227.CrossRefGoogle Scholar
  20. Elrod, Terry (1991): Internal analysis of market structure: Recent developments and future prospects, Marketing Letters, 2 (3): 253–266.CrossRefGoogle Scholar
  21. Elrod, Terry and Michael P. Keane (1995): A factor-analytic probit model for representing the market structure in panel data, Journal of Marketing Research, 32 (1): 1–16.CrossRefGoogle Scholar
  22. Eymann, Angelika, Axel Börsch-Supan, and Rob Euwals (2002): Risk attitude, impatience, and asset choice, SFB 504 Discussion Paper, No. 02–28, University of Mannheim.Google Scholar
  23. Fornell, Claes and David L. Larcker (1981): Structural equation models with unobservable variables and measurement error, Journal of Marketing Research, 18 (1): 39–50.CrossRefGoogle Scholar
  24. Green, William H. (2008): Econometric analysis, 6th ed., Prentice Hall: Englewood Cliffs.Google Scholar
  25. Jöreskog, Karl G. and Arthur S. Goldberger (1975): Estimation of a model with multiple indicators and multiple causes of a single latent variable, Journal of the American Statistical Association, 70 (351): 631–639.CrossRefGoogle Scholar
  26. Judd, Kenneth L. (1998): Numerical methods in economics, Cambridge: MIT Press.Google Scholar
  27. Kassarjian, Harold H. and Mary J. Sheffet (1991): Personality and consumer behavior: An update, in: Harold H. Kassarjian and Thomas S. Robertson (eds.): Handbook of Consumer Behavior, Prentice-Hall, New Jersey, 281–301.Google Scholar
  28. Keijer, M. J. N. and Piet Rietveld (2000): How do people get to the railway station? The Dutch experience, Transportation Planning and Technology, 23 (3): 215–235.CrossRefGoogle Scholar
  29. Kitamura, Ryuichi (1989): A causal analysis of car ownership and transit use, Transportation, 16 (2): 155–73.CrossRefGoogle Scholar
  30. Kristiansen, Connie M. and Alan M. Hotte (1996): Morality and the self: Implications for when and how of value-attitude behavior relations, in: Clive Seligman, James M. Olson, and Mark P. Zanna (eds.): The Ontario Symposium: Vol. 8 — The psychology of values, Lawrence Erlbaum, Hillsdale, NJ, 77–106.Google Scholar
  31. Lanzendorf, Martin (2002): Mobility styles and behaviour — Application of a lifestyle approach to leisure travel, Transportation Research Record, 1807: 163–173.CrossRefGoogle Scholar
  32. Loutzenheiser, David R. (1997): Pedestrian access to transit: Model of walk trips and their design and urban form determinants around bay area rapid transit stations, Transportation Research Record, 1604: 40–49.CrossRefGoogle Scholar
  33. Luo, Lan, P. K. Kannan, and Brian T. Ratchford (2008), Incorporating subjective characteristics in product design and evaluations, Journal of Marketing Research, 45 (2): 182–194.CrossRefGoogle Scholar
  34. McCarthy, John A. and L. J. Shrum (1994): The recycling of solid wastes: Personal value orientation, and attitudes about recycling as antecedents of recycling behavior, Journal of Business Research, 30 (1): 53–62.CrossRefGoogle Scholar
  35. McFadden, Daniel L. (1974): The measurement of urban travel demand, Journal of Public Economics, 3 (4): 303–328.CrossRefGoogle Scholar
  36. McFadden, Daniel L. (1986): The choice theory approach to marketing research, Marketing Science, 5 (4): 275–297.CrossRefGoogle Scholar
  37. Morikawa, Taka, Moshe Ben-Akiva, and Daniel L. McFadden (2002): Discrete choice models incorporating revealed preferences and psychometric data, in: Philip H. Franses and Alan L. Montgomery (eds.): Econometric Models in Marketing, Elsevier, Amsterdam, 29–55.Google Scholar
  38. Muthén, Bengt O. (1983): Latent variable structural equation modeling with categorical data, Journal of Econometrics, 22 (1–2): 43–65.CrossRefGoogle Scholar
  39. Muthén, Bengt O. (1984): A general structural equation model with dichotomous, ordered categorical, and continuous latent variable indicators, Psychometrica, 49 (1): 115–132.CrossRefGoogle Scholar
  40. Muthén, Linda K. and Bengt O. Muthén (1998–2007): Mplus User’s Guide. 5th ed., Muthén & Muthén: Los Angeles.Google Scholar
  41. Nordlund, Annika M. and Jörgen Garwill (2003): Effects of values, problem awareness, and personal norm on willingness to reduce personal car use, Journal of Environmental Psychology, 23 (4): 339–347.CrossRefGoogle Scholar
  42. O’Sullivan, Sean and John F. Morrall (1996): Walking distances to and from light-rail transit stations, Transportation Research Record, 1538: 19–26.CrossRefGoogle Scholar
  43. Paulssen, Marcel and Richard P. Bagozzi (2006): Goal hierarchies as antecedents of market structure, Psychology & Marketing, 23 (8): 689–709.CrossRefGoogle Scholar
  44. Prince-Gibson, Eetta and Shalom H. Schwartz (1998): Value priorities and gender, Social Psychology Quarterly, 61 (1): 49–67.CrossRefGoogle Scholar
  45. Schmid, Klaus-Peter (2003, May 15): Begrenzt einsatzfähig [Limited fitness for use]. Die Zeit, 21. (in German)Google Scholar
  46. Schwartz, Shalom H. (2003): A proposal for measuring value orientations across nations, in: European Social Survey: The questionnaire development package of the European Social Survey, Chapter 7, 259–319.Google Scholar
  47. Schwartz, Shalom H. and Wolfgang Bilsky (1990): Toward a theory of the universal content and structure of values: Extensions and cross-cultural replications, Journal of Personality and Social Psychology, 58 (5): 878–891.CrossRefGoogle Scholar
  48. Schwartz, Shalom H., Gila Melech, Arielle Lehmann, Steven Burgess, Mari Harris, and Vicki Owens (2001): Extending the cross-cultural validity of the theory of basic human values with a different method of measurement, Journal of Cross Cultural Psychology, 32 (5): 519–542.CrossRefGoogle Scholar
  49. Schwartz, Shalom H. and Tammy Rubel (2005): Sex differences in value priorities: Cross-cultural and multi-method studies, Journal of Personality and Social Psychology, 89 (6): 1010–1028.CrossRefGoogle Scholar
  50. Skrondal, Anders and Sophia Rabe-Hesketh (2004): Generalized latent variable modelling, Chapman & Hall: Boca Raton.CrossRefGoogle Scholar
  51. Thøgersen, John (2006): Understanding repetitive travel mode choices in a stable context: A panel study approach, Transportation Research Part A: Policy & Practice, 40 (8): 621–638.Google Scholar
  52. Thøgersen, John and Suzanne C. Grunert-Beckmann (1997): Values and attitude formation towards emerging attitude objects: From recycling to general waste minimizing behavior, Advances in Consumer Research, 24 (1): 82–189.Google Scholar
  53. Train, Kenneth E. (1978): A validation test of a disaggregate mode choice model: Transportation Research Part A: Policy and Practice, 12 (2): 167–174.Google Scholar
  54. Train, Kenneth E. (1980): A structured logit model of auto ownership and mode choice, Review of Economic Studies, 28 (2): 357–70.CrossRefGoogle Scholar
  55. Train, Kenneth E. (2003): Discrete choice with simulations, Cambridge University Press: Cambridge, UK.CrossRefGoogle Scholar
  56. van der Sluis, Sophie, Conor V. Dolan, and Reinoud D. Stoel (2005): A note on testing perfect correlations in SEM, Structural Equation Modeling, 12 (4): 551–577.CrossRefGoogle Scholar
  57. Vermunt, Jeroen K. and Jay Magidson (2005): Latent Gold Choice 4.0 User’s Manual, Statistical Innovations: Belmont, MA.Google Scholar
  58. Vredin Johansson, Maria, Tobias Heldt, and Per Johansson (2005): Latent variables in a travel mode choice model: Attitudinal and behavioural indicator variables, Working Paper 2005:5, Uppsala University.Google Scholar
  59. Vredin Johansson, Maria, Tobias Heldt, and Per Johansson (2006): The effects of attitudes and personality traits on mode choice, Transportation Research Part A: Policy and Practice, 40 (6): 507–525.Google Scholar
  60. Walker, Joan L. and Moshe Ben-Akiva (2002): Generalized random utility model, Mathematical Social Sciences, 43 (3): 303–343.CrossRefGoogle Scholar
  61. Walker, Joan L. and Jieping Li (2007): Latent lifestyle preferences and household location decisions, Journal of Geographical Systems, 9,(1): 77–101.CrossRefGoogle Scholar
  62. Wedel, Michel, Wagner Kamakura, Neeraj Arora, Albert Bemmaor, Jeongwen Chiang, Terry Elrod, Rich Johnson, Peter Lenk, Scott Neslin, and Carsten S. Poulsen (1999): Discrete and continuous representations of unobserved heterogeneity in choice modeling, Marketing Letters, 10 (3): 219–232.CrossRefGoogle Scholar
  63. Yang, Sha, Greg M. Allenby, and Geraldine Fennell (2002): Modeling variation in brand preference: The roles of objective environment and motivating conditions, Marketing Science, 21 (1): 14–31.CrossRefGoogle Scholar
  64. Yu, Ching-Yun (2002): Evaluating cutoff criteria of model fit indices for latent variable models with binary and continuous outcomes, Dissertation, University of California: Los Angeles.Google Scholar

Copyright information

© The Author(s) 2008

Authors and Affiliations

  1. 1.Institute of MarketingHumboldt University of BerlinGermany
  2. 2.HEC Hautes Etudes CommercialesUniversité de GenèveSwitzerland
  3. 3.Infas TTR FrankfurtGermany

Personalised recommendations