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The Joint identification of utility and discount functions from stated choice data: An application to durable goods adoption

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  • Jean-Pierre Dubé
  • Günter Hitsch
  • Pranav Jindal
Abstract
We present a survey design that generalizes static conjoint experiments to elicit inter-temporal adoption decisions for durable goods. We show that consumers’ utility and discount functions in a dynamic discrete choice model are jointly identified using data generated by this specific design. In contrast, based on revealed preference data, the utility and discount functions are generally not jointly identified even if consumers’ expectations are known. The separation of current-period preferences from discounting is necessary to forecast the diffusion of a durable good under alternative marketing strategies. We illustrate the approach using two surveys eliciting Blu-ray player adoption decisions. Both model-free evidence and the estimates based on a dynamic discrete choice model indicate that consumers make forward-looking adoption decisions. In both surveys the average discount rate is 43 percent, corresponding to a substantially higher degree of impatience than the rate implied by aggregate asset returns. The estimates also reveal a large degree of heterogeneity in the discount rates across consumers, but only little evidence for hyperbolic discounting. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Jean-Pierre Dubé & Günter Hitsch & Pranav Jindal, 2014. "The Joint identification of utility and discount functions from stated choice data: An application to durable goods adoption," Quantitative Marketing and Economics (QME), Springer, vol. 12(4), pages 331-377, December.
    • Handle: RePEc:kap:qmktec:v:12:y:2014:i:4:p:331-377
    DOI: 10.1007/s11129-014-9149-3
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    More about this item

    Keywords

    Conjoint analysis; Diffusion models; Durable goods adoption; Dynamic discrete choice models; Identification of discount factors; C14; D9; D12; M31;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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