Exploring attribute aggregation in the Lancasterian theory of demand

Mesfin G Genie* (Corresponding Author), Mandy Ryan, Nicolas Krucien

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Multi-attribute choices are commonly analysed in economics to value goods and services. Analysis assumes individuals consider all attributes, making trade-offs between them. Such decision-making is cognitively demanding, often triggering alternative decision rules. We develop a new model where individuals aggregate multi-attribute information into metaattributes. Applying our model to a choice experiment (CE) dataset, accounting for attribute aggregation (AA) improves model fit. The probability of adopting AA is greater for: homogenous attribute information; participants who had shorter response time and failed the dominance test; and for later located choices. Accounting for AA has implications for welfare estimates. Our results underline the importance of accounting for information processing rules when modelling multi-attribute choices.
Original languageEnglish
JournalHealth Economics
DOIs
Publication statusAccepted/In press - 14 Feb 2021

Keywords

  • Multi-attribute choices
  • Attributes aggregation
  • Information processing
  • Choice modelling
  • Choice experiment

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