About attitudes and perceptions: finding the proper way to consider latent variables in discrete choice models

We provide an in-depth theoretical discussion about the differences between individual-specific latent constructs (representing attitudes, for example, but also other characteristics such as values or personality traits) and alternative-specific latent constructs (that may represent perceptions) affecting the choice-making process of individuals; we also carry out an empirical exercise to analyze their effects. This discussion is of importance, as the majority of papers considering attitudinal latent variables just take these as attributes affecting directly the utility of a certain alternative, while systematic taste variations are rarely considered and perceptions are mostly ignored. The results of our case study show that perceptions may indeed affect the decision making process and that they are able to capture a significant part of the variability that is normally explained by alternative specific constants. Furthermore, our results indicate that attitudes may be a reason for systematic taste variations, and that a proper categorization of latent variables, in accordance with underlying theory, may outperform the customary assumption of linearity.