Abstract:

Discrete choice models have been widely used in marketing research since 1980s and have played an indispensible role in advancing marketing science during the past thirty years. This paper reviews related literature that contribute to the developments and applications of discrete choice models in marketing. We review the theoretical foundations of discrete choice models and discuss the key assumptions and model features of traditional logit and probit models. Building on the discussion, we highlight the limitations of the traditional discrete choice models and the major developments over the past thirty years that extend discrete choice models to overcome those limitations. Finally, we discuss the contribution of this research and conclude the paper with thoughts on future research directions. This paper intends to help marketing science researchers better understand the discrete choice models and the recent advance of them, and encourage the further developments and applications of those models.

Key words: discrete choice model, logit model, probit model, quantitative marketing research