Hybrid discrete choice models: Gained insights versus increasing effort

Abstract

Hybrid choice models expand the standard models in discrete choice modelling by incorporating psychological factors as latent variables. They could therefore provide further insights into choice processes and underlying taste heterogeneity but the costs of estimating these models often significantly increase. This paper aims at comparing the results from a hybrid choice model and a classical random parameter logit. Point of departure for this analysis is whether researchers and practitioners should add hybrid choice models to their suite of models routinely estimated. Our comparison reveals, in line with the few prior studies, that hybrid models gain in efficiency by the inclusion of additional information. The use of one of the two proposed approaches, however, depends on the objective of the analysis. If disentangling preference heterogeneity is most important, hybrid model seems to be preferable. If the focus is on predictive power, a standard random parameter logit model might be the better choice. Finally, we give recommendations for an adequate use of hybrid choice models based on known principles of elementary scientific inference.