Abstract:
Established procedures of analyzing the effect of context on choice consider simple, compact environments in laboratory settings. Such an approach severely limits the study of context effects and, as a consequence, applicability of findings. In this paper, we generalize existing approaches in modeling choice with the aim of developing a toolbox for the analysis of observational data. We consider three main context measures: attraction, compromise, and similarity. The proposed methodology hinges on ex ante calculation of context features for every alternative in multi-option, multi-attribute choice sets. This approach minimizes computational complications of estimating the resulting choice model. The proposed approach is applied to air traveler choice data using an extensive observational dataset. This yields the first examination of all three context effects simultaneously in a large observational dataset. We discuss consequences of product (re)design based on the results of the empirical
exercise to showcase the potential use of the developed methodology in managerial practice.