We describe and apply choice models, including generalizations of logit called "mixed logits," that do not exhibit the restrictive "independence from irrelevant alternatives" property and can approximate any substitution pattern. The models are estimated on data from a stated-preference survey that elicited customers' preferences among gas, electric, methanol, and CNG vehicles with various attributes.

We estimate random-parameter logit models of anglers' choice of fishing site. The models generalize logit by allowing coefficients to vary randomly over anglers rather than being fixed. The models do not exhibit the restrictive "independence from irrelevant alternatives property" of logit and can represent any substitution pattern. Estimation explicitly accounts for the fact that the variation in coefficients over anglers induces correlation in unobserved utility over trips by the same angler. Willingness-to-pay for improved fish stock and the value to anglers of specific sites are calculated from the models and compared with the estimates obtained from a standard logit model.

In a competitive marketplace, the effectiveness of any element of the marketing mix is determined not only by its absolute value, but also by its relative value with respect to the competition. For example, the effectiveness of a price cut in increasing demand is critically related to competitors ’ reaction to the price change. Managers therefore need to know the nature of competitive interactions among firms. In this paper, we take a theory-driven empirical approach to gain a deeper understanding of the competitive pricing behavior in the U.S. auto market. The ability-motivation paradigm posits that a firm needs both the ability and the motivation to succeed in implementing a strategy (Boulding and Staelin 1995). We use arguments from the game-theoretic literature to understand firm motivation and abilities

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We propose a utility-theoretic brand-choice model that accounts for four different sources of state dependence: 1. effects of lagged choices (structural state dependence), 2. effects of serially correlated error terms in the random utility function (habit persistence type 1), 3. effects of serial correlations between utility-maximizing alternatives on successive purchase occasions of a household (habit persistence type 2), and 4. effects of lagged marketing variables (carryover effects). Our proposed model also allows habit persistence to be a function of lagged marketing variables, while accommodating the effects of unobserved heterogeneity in household choice parameters. This model is more flexible than existing state-dependence models in marketing and labor econometrics. Using scanner panel data, we find structural state dependence to be the most important source of state dependence. Marketing-mix elasticities are systematically understated if state-dependence effects are incompletely accounted for. The Seetharaman and Chintagunta (1998) model is shown to recover spurious variety-seeking effects while overstating habit-persistence effects. Ignoring habit persistence type 1 leads to an underestimation, while ignoring habit persistence type 2 leads to an overestimation of structural state-dependence effects. We find lagged promotions to have carryover effects on habit persistence. Ignoring one or more sources of state dependence underestimates the total incremental impact of a sales promotion. We draw implications for manufacturer pricing.

It is well documented in the marketing literature that households ’ brand choices within categories of inexpensive, frequently consumed packaged goods- such as soft drinks and coffee – are characterized by state dependence effects, i.e., a household’s brand choice in the current period depends on the household’s previous brand choices. Such effects arise out of households ’ tendencies to repeat-purchase brands out of habit (“inertia”) or switch brands in a desire for variety (“variety-seeking”). When such state dependence effects are present, market shares of brands will tend to be correlated over time, i.e. the share of a brand in the current period will be a function of not just the current marketing activities of firms, but also lagged shares of the brand in previous periods. To the extent that state dependence effects characterize the evolution of brands ’ market shares over time, firms must dynamically compete in prices over time taking into account inter-temporal linkages in demand for their brands. In this study, we model and estimate such dynamic pricing policies of firms. First, we use micro-level scanner panel data on a product category to estimate a household-level brand choice model with state dependence. We then use the estimates of this brand choice model, along with observed inter-purchase times in the product category, to construct a predictive model for market-level brand sales. This brand-sales model serves as an input into a dynamic pricing model of firms, which is based on the idea that firms

We propose a utility-theoretic brand choice model that accounts for four different sources of state dependence:1.effectsoflaggedchoices(structural state dependence), 2. effects of serially correlated error terms in the random utility function (habit persistence – type 1), 3. effects of serial correlations between utility-maximizing alternatives on successive purchase occasions of a household (habit persistence – type 2), and 4. effects of lagged marketing variables (carryover effects). Our proposed model also allows habit-persistence to be a function of lagged marketing variables, while accommodating the effects of unobserved heterogeneity in household choice parameters. This model is more flexible than existing state dependence models in marketing and labor econometrics. Using scanner panel data, we find structural state dependence to be the most important source of statedependence. Marketing-mix elasticities are systematically understated if state-dependence effects are incompletely accounted for. The Seetharaman and Chintagunta (1998) model is shown to recover spurious variety-seeking effects while overstating habit-persistence effects. Ignoring habit-persistence type 1 leads to an underestimation, while ignoring habit-persistence type 2 leads to an overestimation, of structural state-dependence effects. We find lagged promotions to have carryover effects on habit-persistence. Ignoring one or more sources of state dependence underestimates the total incremental impact of a sales promotion. We draw implications for manufacturer pricing.

www.elsevier.com/locate/ijresmar Probabilistic versus random-utility models of state dependence: an empirical comparison P.B. Seetharaman*

The allocation of marketing budgets across advertising and sales promotions has changed over the past decade with a marked decrease in the percentage of budgets directed towards advertising. Moreover, there has been much speculation regarding how these changes have affected a brand’s positioning vis-a-vis ` its competitors. In spite of this speculation, previous research has not examined the impact of changes in promotion and advertising on market structure. The purpose of this paper is therefore to ascertain how changes in promotional and advertising policy affect market structure over the long-term. The eight and one quarter years of scanner panel data used for our analysis indicate that brands in the analyzed product category tend to fall into premiumrnon-premium and attribute-based Ž mildness. tiers. Furthermore, the data suggest that the differentiation between non-premium and premium brands has diminished during the period of our study Ž 1984–1992.. The data also suggest that increases in price promotions and reductions in advertising have led to decreased differentiation between brands. These findings suggest that shifts in marketing dollars from advertising to promotions have

Though it is a well-accepted fact that consumers indulge in multi-purpose shopping, most previous models of store choice assume that grocery shopping trips are single-purpose trips. This paper provides the first empirical analysis of multi-purpose shopping using data on actual shopping trips. A latent class factor analytic logit model is proposed, which provides a representation of the market structure of grocery store competition, while integrating; multi-purpose shopping, retail pricing format and location strategy. We conclude that incorporating multi-purpose shopping trips provides a better understanding of the competitive market structure, and discuss the managerial implications for the selection of marketing strategies.