Mother logit analysis of substitution effects in consumer shopping destination choice

Abstract

The feasibility of new shopping centers is largely related to their relative location and spending power in the trade area. Commercial developers, retailers, and retail planners need information about the likely impact of new retail developments on consumer choice behavior. Several types of consumer choice models have been applied to assess the effects of retail developments. However, most of these models are based on the so-called independence of irrelevant alternatives assumption, and the variables of interest are included in the models in some indirect manner. The purpose of this article is to demonstrate how substitution effects in consumer shopping behavior can be estimated as a function of marketing strategies or planning scenarios. We focus on the universal or “mother” logit model in a decompositional framework. The mother logit model represents a generalization of conventional multinomial logit models in that the utility of alternatives depends not only on their attributes, but also upon the attributes of other alternatives in the choice set. These so-called cross-effects represent corrections on the utilities as predicted by the conventional multinomial logit model to account for substitution and other effects. The mother logit model was applied to predict the likely effects of a number of proposed actions to improve the attractiveness of some shopping centers in the Einhoven region, The Netherlands. Rather than using attributes of shopping centers, possible planning actions were used to specify the utility function of the mother logit model. The model was estimated using choice data observed in hypothetical situations, created according to the principles of experimental design strategies. The results indicated that some planning actions affect the utility of other shopping centers significantly. Competition between shopping centers seemed to be stronger among centers belonging to the same hierarchical level and weaker among centers of different hierarchical levels, indicating the existence of substitution effects on consumer shopping center choice behavior.