An Empirical Two-Stage Choice Model with Varying Decision Rules Applied to Internet Clickstream Data

Abstract

In this article, the author proposes and applies an empirical two-stage choice model to Internet clickstream data that captures observed choices for two choice stages: products viewed and products purchased. The model allows for interdependences between choices within a stage as well as the use of varying decision rules in each stage. The author accommodates heterogeneity in preferences and in decision rules. The proposed model uses observed choices to infer both attribute preference ratings and criterion attributes. The results show empirically, in a field setting, that the product attributes evaluated in Stage 1 differ from those evaluated in Stage 2. Consistent with existing theory, consumers tend to use simpler decision rules based on a subset of attribute information in earlier stages. The author also finds some preliminary evidence that attributes such as price and size tend to be considered in only one of the two stages, whereas ingredient attributes tend to be considered in both stages. From a managerial perspective, the identification of criterion attributes, coupled with the preference parameters estimated by the model, can assist with the targeting and positioning of promotional strategies.