What is the role of consideration sets in choice modeling?

Abstract

This paper reports an empirical investigation of the role of consumer consideration sets in modeling consumers' choices among discrete alternatives. Much of the marketing literature treats formation of a consideration set as the first step in a two-step choice process. The second step of this process consists of choosing an alternative from the consideration set. Only considered alternatives can be chosen. This paper rprsents evidence that operational consideration sets are simply indicators of preferences. For the choice settings we investigate, choice need not be modeled as a two-step process in which a consideration step precedes choice. Modeling choice this way may lead to a misspecified model that makes erroneous forecasts. However, data on consumers' consideration sets can provide an analyst with information about preferences that may be used to increase the efficiency with which the parameters of a choice model are estimated.