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Discrete choice in marketing through the lens of rational inattention

Author

Listed:
  • Sergey Turlo

    (Johann Wolfgang Goethe University Frankfurt)

  • Matteo Fina

    (Johann Wolfgang Goethe University Frankfurt)

  • Johannes Kasinger

    (Tilburg University
    Leibniz Institute for Financial Research (SAFE))

  • Arash Laghaie

    (Nova School of Business and Economics)

  • Thomas Otter

    (Johann Wolfgang Goethe University Frankfurt
    Nova School of Business and Economics)

Abstract

Models derived from random utility theory represent the workhorse methods to learn about consumer preferences from discrete choice data. However, a large body of literature documents various behavioral patterns that cannot be captured by basic random utility models and require different non-unified adjustments to accommodate these patterns. In this article, we discuss strategies how to apply rational inattention theory—which explains a large variety of such departures—to the analysis of discrete choice among multiple alternatives described along multiple attributes. We first review existing applications that make restrictive belief assumptions to obtain choice probabilities in closed multinomial logit form. We then propose a model that allows for general consumer beliefs and demonstrate its empirical identification. Further, we illustrate how this model naturally motivates stylized empirical results that are hard to reconcile from a random utility perspective.

Suggested Citation

  • Sergey Turlo & Matteo Fina & Johannes Kasinger & Arash Laghaie & Thomas Otter, 2025. "Discrete choice in marketing through the lens of rational inattention," Quantitative Marketing and Economics (QME), Springer, vol. 23(1), pages 45-104, March.
  • Handle: RePEc:kap:qmktec:v:23:y:2025:i:1:d:10.1007_s11129-025-09292-9
    DOI: 10.1007/s11129-025-09292-9
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    More about this item

    Keywords

    Choice modeling; Rational inattention; Conjoint analysis; Discrete choice experiments;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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