Heterogeneity in decision processes: Embedding extremeness aversion, risk attitude and perceptual conditioning in multiple process rules choice making

Abstract

There is an increasing interest, in the discrete choice modelling literature, in alternative behavioural paradigms that represent ways in which individuals make choices when faced with a choice set of alternatives. We see an increasing number of studies using process heuristics such as attribute non-attendance, relative advantage maximisation, extremeness aversion and value learning. With some exceptions, the study of each heuristic has been undertaken in isolation from other candidate heuristics; the exceptions being joint investigation into a fully compensatory model defined by a linear additive in attributes and parameters specification and one process heuristic, commonly using latent class models. This paper investigates the role that two behaviourally appealing decision rules play jointly in explaining choice making, both of which reflect risk attitude in different ways. We jointly estimate a model that accounts for extremeness aversion and an extended expected utility transformation for an attribute that accounts for risk attitude and perceptual conditioning under fully compensatory attributes. We use a stated choice experiment associated with a car choice between tolled and non-tolled roads in Australia. The findings suggest that the mean VTTS from the multiple-rule model is higher than the mean estimates obtained from each of the stand-alone models.