Abstract
In this chapter, we again consider the problem of selecting attributes to appear in the discrete choice analysis model, but in this case latent variable modeling is used to consider the customer attitude and perception in the choice model more comprehensively than in the previous chapters. The latent variable approach better captures psychological factors that affect the purchase behavior of customers. The chapter begins by describing the need for latent variables in a demand model, and then follows with the formulation and estimation of the integrated latent variable demand model. A case study is presented for a vehicle engine design problem, the same as presented in Chap. 4 (case study 2). The advantages and disadvantages of the latent variable model approach are discussed.
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