A Direct Utility Model for Economies of Scope and Access

Economies of scope in direct utility models exist when consumers encounter costs and inconvenience in purchase and consumption. Travel time, product acquisition, training, expertise, and skills are examples of factors that impact the ability of consumers to derive utility from offerings beyond the price of a good. Household production of these factors often shares commonalities among choice alternatives, making it more likely that some products would be purchased and consumed in conjunction with others. We develop a model with scope economies for a latent time-related resource that constrains consumer purchases. The model is applied to a conjoint dataset of theme park demand, where we find that economies of scope alter utility and budget parameter estimates and lead to a better model fit, smaller price sensitivities, and larger compensating value estimates relative to existing models of demand