A two-stage model jointly revealing the determinants of non-compensatory conjunctive choice set formation and compensatory choice

Understanding the distribution and determinants of search-criteria thresholds helps in representing choice set formation and choice behavior. This paper presents the development and estimation of a two-stage model that jointly represents search-criteria thresholds, within a non-compensatory choice set formation stage, and choice behavior, within a compensatory stage. Data were collected by means of a custom designed web-based choice experiment that seamlessly tracks the entire choice process by recording choice protocols.The model is applied to off-campus rental apartment choice by students, as an example of a complex choice situation. The model combines three correlated ordered-response models for the search criteria with a multinomial logit model for the choice among a realistically large realm of 200 alternatives. Estimates demonstrate that: i) the thresholds are correlated and their selection can be explained by individual characteristics, preferences and perceptions; and ii) the suggested methodology alleviates the computational complexity embedded in two-stage models by reducing the number of theoretically possible choice sets to the actually chosen ones.