INTEGRATION OF CHOICE AND LATENT VARIABLE MODELS. IN: IN PERPETUAL MOTION: TRAVEL BEHAVIOR RESEARCH OPPORTUNITIES AND APPLICATION CHALLENGES

Abstract

This paper presents conceptual and methodogical frameworks for inclusion of latent factors as explanatory variables in choice models. The method described provides for explicit treatment of the psychological factors affecting the decisionmaking process by modeling them as latent variables. Psychometric data, such as responses to attitudinal and perceptual survey questions, are used as indicators of the latent psychological factors. The resulting approach integrates choice models with latent variable models, in which the system of equations is estimated at the same time. This simultaneous estimation of the model structure represents an improvement over sequential methods, as it produces consistent and efficient estimates of the parameters. Three applications of the methodology give examples and demonstrate the flexibility of the approach, the resulting gain in explanatory power, and the improved specification of discrete choice models.