Allowing for heterogeneous decision rules in discrete choice models: an approach and four case studies

The study of respondent heterogeneity is one of the main areas of research in the field of choice modelling. The general emphasis is on variations across respondents in relative taste parameters while maintaining the assumption of homogeneous utility maximising decision rules. While recent work has allowed for differences in the utility specification across respondents in the context of looking at heterogeneous information processing strategies, the underlying assumption that all respondents employ the same choice paradigm remains. This is despite evidence in the literature that different paradigms work differently well on given datasets. In this article, we argue that such differences may in fact extend to respondents within a single dataset. We accommodate these differences in a latent class model, where individual classes make use of different underlying paradigms. We present four applications using three different datasets, showing mixtures between ‘standard’ random utility maximisation models and lexicography based models, models with multiple reference points, elimination by aspects models and random regret minimisation models. In each of the case studies, the behavioural mixing model obtains significant gains in fit over the base structure where all respondents are hypothesised to use the same rule. The findings offer important further insights into the behavioural patterns of respondents. There is also evidence that what is retrieved as taste heterogeneity in standard models may in fact be heterogeneity in decision rules.