Purchase-Frequency Bias in Random-Coefficients Brand-Choice Models

Bibliographic Data

ID19418142
AuthorsAnand V Bodapati (University of California, Los Angeles), Sachin Gupta (0000-0002-7383-1759, Cornell University)
Year2005
Volume23
Issue4
Pages473-484
Publication date2005-10-01
Open AccessNo
TypeARTICLE
VenueJournal of Business and Economic Statistics (JOURNAL)
Journal identifiersISSN: 0735-0015 • E-ISSN: 1537-2707
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1198/073500104000000569
OpenAlexW1995364421
LanguageEN
References cited18

Conventional random-coefficients models of conditional brand choice using panel data ignore the dependence of the random-coefficients distribution on the purchase frequencies. We show that this leads to biased estimates and propose a conditional likelihood approach to obtain unbiased estimates. Unlike alternative approaches that require observation of “no-purchase” occasions, our proposed method relies only on purchase data. Furthermore, our approach does not require that the researcher specify the distribution of purchase frequencies. As a result, estimates of the brand-choice model are unaffected by misspecification of the model of purchase frequencies. We demonstrate the performance of the proposed approach in simulated data and in scanner data. We find that results differ substantively from the conventional latent-class model in terms of segment membership probabilities, segment characteristics, and price elasticities

Conditional probability distribution · Econometrics · Panel data · Random effects model · Statistics · Computer Science · Consumer Market Behavior and Pricing · Economic and Environmental Valuation · Economics of Agriculture and Food Markets · Mathematics

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