Consumer Choice Process for Experience Goods: An Econometric Model and Analysis

Abstract

In this research, the authors develop and execute an econometric framework to model and analyze the consumer choice process for experience products formally. The authors develop a multistage model that examines choice and postchoice behavior in the context of new movie choices. The modeling framework incorporates psychological variables, such as consumer expectations of choice set elements and latent product interest, and the influence of information sources, such as critic reviews and word of mouth, within a discrete choice formulation. Model estimation allows for the relationship between consumer choice and postchoice behavior. The authors develop an estimation procedure that explicitly accounts for measurement errors in the latent psychological variables. In particular, they propose a probit measurement error model that provides consistent parameter estimates. Data for the model estimation are obtained from a laboratory experiment and a field study. The empirical results provide insights into the role of psychological variables (such as consumer expectations and latent product interest) in consumers’ choice decisions for new movies. The results also identify variables that influence consumers’ postconsumption evaluations and word of mouth. The model estimation and findings provide both methodological and substantive insights.

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