ABSTRACT
This chapter introduces the member of the choice model family: discrete choice models. The discrete choice models mimic real-world competitive markets because they ask consumers to make choices (hence the name), rather than just provide a preference rating as in conjoint. The chapter develops the foundations of discrete choice models from the concept of utility maximization. In discrete choice situations, a consumer again chooses a product that maximizes his or her utility. The chapter argues that arguments of the systematic utility are independent of those of the unobserved part. It presents a pricing scenario as a choice situation for pricing strategies. The chapter discusses terminology and lays the foundations for the experimental design used with this type of problem. It also discusses estimation and interpretation. The chapter describes the estimation and design issues, and emphasizes analysis using the estimated take rates. It also describes software that can be used to design and estimate the models.
