Consumer Market Behavior and Pricing

A Conceptual Model of Service Quality and Its Implications for Future Research

The attainment of quality in products and services has become a pivotal concern of the 1980s. While quality in tangible goods has been described and measured by marketers, quality in services is largely undefined and unresearched. The authors attempt to rectify this situation by reporting the insights obtained in an extensive exploratory investigation of quality in four service businesses and by developing a model of service quality. Propositions and recommendations to stimulate future research about service quality are offered.

A Simple Model of Herd Behavior

We analyze a sequential decision model in which each decision maker looks at the decisions made by previous decision makers in taking her own decision. This is rational for her because these other decision makers may have some information that is important for her. We then show that the decision rules that are chosen by optimizing individuals will be characterized by herd behavior; i.e., people will be doing what others are doing rather than using their information. We then show that the resulting equilibrium is inefficient.

Loss Aversion in Riskless Choice: A Reference-Dependent Model

Much experimental evidence indicates that choice depends on the status quo or reference level: changes of reference point often lead to reversals of preference. We present a reference-dependent theory of consumer choice, which explains such effects by a deformation of indifference curves about the reference point. The central assumption of the theory is that losses and disadvantages have greater impact on preferences than gains and advantages. Implications of loss aversion for economic behavior are considered.

Interaction terms in logit and probit models

Mixed MNL models for discrete response

This paper considers mixed, or random coefficients, multinomial logit (MMNL) models for discrete response, and establishes the following results. Under mild regularity conditions, any discrete choice model derived from random utility maximization has choice probabilities that can be approximated as closely as one pleases by a MMNL model. Practical estimation of a parametric mixing family can be carried out by Maximum Simulated Likelihood Estimation or Method of Simulated Moments, and easily computed instruments are provided that make the latter procedure fairly efficient. The adequacy of a mixing specification can be tested simply as an omitted variable test with appropriately defined artificial variables. An application to a problem of demand for alternative vehicles shows that MMNL provides a flexible and computationally practical approach to discrete response analysis. Copyright © 2000 John Wiley & Sons, Ltd.