a nonparametric approach to modeling choice with limited data choice models today are ubiquitous across a range of applications in operations and marketing real world implementations of many of these models face the formidable stumbling block of simply identifying the right model of choice to use because models of choice are inherently high dimensional objects the typical approach to dealing with this problem is positing a priori a parametric model that one believes adequately captures choice behavior this approach can be substantially suboptimal in scenarios where one cares about using the choice model learned to make fine grained predictions one must contend with the risks of mis specification and overfitting underfitting thus motivated we visit the following problem for a generic model of consumer choice namely distributions over preference lists and a limited amount of data on how consumers actually make decisions such as marginal information about these distributions how may one predict revenues from offering a particular assortment of choices an outcome of our investigation is a nonparametric approach in which the data automatically select the right choice model for revenue predictions the approach is practical using a data set consisting of automobile sales transaction data from a major u s automaker our method demonstrates a 20 improvement in prediction accuracy over state of the art benchmark models this improvement can translate into a 10 increase in revenues from optimizing the offer set we also address a number of theoretical issues among them a qualitative examination of the choice models implicitly learned by the approach we believe that this paper takes a step toward automating the crucial task of choice model selection this paper was accepted by yossi aviv operations management

a two stage disaggregate attribute choice model a two stage disaggregate attribute choice model is proposed and empirically implemented the first stage of the model is attribute processing to screen the number of alternatives down to a lesser number the second stage is brand alternative processing which considers the attributes simultaneously while allowing for tradeoffs among the attributes this two stage approach is then applied to the same real world data set as two single stage disaggregate models logit and maximum likelihood hierarchical mlh which are state of the art models representing the alternative and attribute processing approaches respectively the predictive accuracy of the two stage approach compares favorably to the single stage models in addition it seems to offer diagnostic information that can provide managerial insights not found in the output of the single stage model

dynamic analysis of consumer response to marketing strategies this paper develops a methodology for modeling consumer response that integrates previous research in stochastic brand selection diffusion of innovation test market analysis and new product design the methodology makes it practical to extend brand selection models to include diffusion phenomena such as awareness trial and information flow purchase timing and brand selection are interdependent and both phenomena depend jointly on managerial controls such as advertising coupons price off promotion product positioning and consumer characteristics within this general structure we provide practical estimation procedures a least squares approximation to the maximum likelihood estimates to determine the parameters which link managerial controls to consumer response closed form solutions are derived for cumulative awareness cumulative trial penetration expected sales and purchases due to promotion all as a function of time we also provide simplified expressions for equilibrium t market share tradeoffs among complexity of the diffusion process number of managerial variables nonstationarity complexity of purchase timing consumer segmentation and sample size are made explicit so that the marketing scientist can customize his analyses to the managerial problems that he faces the effects of sample size data interval frequency and collinearity in the explanatory variables are investigated with simulations based on a five state consumer response process which depends on 8 10 marketing variables the paper closes with a brief description of the application and predictive test of a consumer response model based on the methodology

profit maximizing perceptual positions an integrated theory for the selection of product features and price an important component of marketing strategy is to position a product in perceptual space but to realize a perceptual position we must model the link from physical characteristics to perceptual dimensions and we must use this model to maximize profit this paper integrates psychological theories on how consumers process information with economic models and psychometric measurement and it develops a theory for selecting physical features and price to achieve a profit maximizing perceptual position the theory begins with a lancaster like transformation from goods space to characteristics space and investigates the implications of a mapping to a third space perceptual space we show that all products efficient in perceptual space must be efficient in characteristics space but not conversely but consumers vary in their preference and the way they perceive products thus we introduce distributional components to the theory and derive both geometric and analytic methods to incorporate this consumer heterogeneity next we investigate costs and derive a perceptual expansion path along which a profit maximizing position must exist conjoint analysis and quantal choice models provide the measurements to implement the theory the theory is illustrated with a hypothetical example from the analgesics market and some of the potential psychometric measurements are illustrated with an empirical application in the communications market

the influence of involvement on disaggregate attribute choice models the state of the art in applying the various disaggregate choice algorithms is to assume homogeneity of choice process within the population being analyzed this article uses the involvement variable a priori to categorize the sample population into a high involvement segment using a model that assumes a simultaneous or alternative processing approach and a low involvement segment using a model that assumes a hierarchical or an attribute processing approach empirical results indicate increased predictive accuracy and diagnostic information that is more closely related to established consumer behavior theory

a multiattribute model of consumer choice during product learning the processes of consumer preference formation during product learning are analyzed a hypothesis about how individuals form attribute expectations is used to derive a dynamic multinomial logit model of individual choice which endogenously recognizes product learning the model and its underlying assumptions are then tested in the context of an interactive grocery store learning game the results support most elements of the proposed model structure an assumption of temporal stationarity in attribute salience however could not be supported approaches to implementation of the model are discussed and implications for marketing management and research in individual choice modeling are addressed

an investigation into the order of the brand choice process this paper investigates the order of the brand choice process at the individual family level using a variety of tests t likelihood ratio binomial runs and multinomial runs tests the test of stationarity developed permits separate analyses for stationary and nonstationary purchase sequences our analyses indicate that the purchase sequences of a majority of stationary consumers are consistent with the zero order assumption this result is observed for all the nine frequently bought packaged goods studied with the use of panel data and for a product category soft drinks using experimental data

an empirical comparison of the validity of a neural net based multinomial logit choice model to alternative model specifications applications of choice models to brand purchase data as a rule specify a linear deterministic utility function we estimate deterministic utility by means of a neural net able to approximate any continuous multivariate function and its derivatives to a desired level of precision we compare this model to related alternatives both with linear and nonlinear utility functions alternatives with nonlinear utility functions are based on generalized additive modeling and taylor series expansion respectively we analyze purchase data of the six largest brands in terms of market share for two product groups neural choice models outperform the alternative models studied w r t posterior probabilities they also attain the best crossvalidated log likelihood values these results demonstrate that the increase in complexity caused by the neural choice model is justified by higher validity in the empirical study the neural choice models imply elasticities different from those obtained by linear utility multinomial logit models for several predictors neural choice models discover inversely s shaped saturation and interaction effects on utility

an empirical analysis of latitude of price acceptance in consumer package goods scanner panel data analyses for sweetened and unsweetened drink categories with four brands in each support the presence of a region of price insensitivity around a reference price the analyses also suggest that consumers with higher average reference price have a wider latitude of price acceptance consumers with a higher frequency of purchase i e shorter average interpurchase time interval are found to have a narrower latitude of price acceptance because they are more aware of the range of price distributions finally consumers with a higher average brand loyalty have a wider latitude of price acceptance demonstrating greater tolerance of price fluctuations

the ability of nash s theory of cooperative games to predict the outcomes of buyer seller negotiations a dyad level test this research develops and implements a dyad level procedure for testing whether the outcomes of buyer seller negotiations correspond to settlements prescribed by nash s theory of cooperative games the procedure entails a multivariate statistical test in which some parameters are estimated by simulation while others are provided directly from the assessment of negotiator utility functions by means of conjoint analysis the procedure is applied to an experiment in which subjects participated in a realistic role playing exercise that replicated the purchase of television advertising time results indicate that at the 0 01 significance level 57 8 of the dyads can be rejected as not having achieved nash solutions these results and their implications for marketing practitioners as well as future research are discussed

formal choice models in marketing the paper gives an overview and evaluates the theoretical traditions underlying choice models that are used in marketing in particular the emphasis of this essay is on the underlying assumptions limitations and empirical demands of these choice models four fundamental choice models are used as a basis to analyze this complex field the neoclassical economic theory as extended by lancaster the risk preference theory of choices under uncertainty the strict utility theory and the random utility theory these four choice models and their extensions are compared and contrasted along the three critical steps in the model building process theory generation parameterization and estimation

a nonparametric density estimation method for brand choice using scanner data nonparametric density estimation using a kernel method is proposed to model consumer brand choice recent availability of large scanner panel data allows the use of nonparametric approach which has few or at least fewer underlying assumptions and affords greater structural flexibility by removing as many assumptions as possible the author constructs the ultimate nonparametric model radically departing from the traditional approaches to highlight the differences in implementation and performance the proposed model does not involve either parameters that approximate certain distributions as in stochastic models or latent concepts such as utility as in utility maximization models the performance criteria include prediction of market response and brand choice share tracking and robustness under violation of various assumptions involved in parametric choice models such as correlated disturbance and misspecification the method is compared with a popular parametric counterpart the multinomial logit model on simulated and actual scanner panel data the paper emphasizes the conceptual importance of the nonparametric approach by discussing its advantages limitations and its complementary role in developing refining and diagnosing parametric models this perspective affords insight to modeling philosophy and suggests the possibility of a hybrid approach

international cooperation for sale abstract this paper shows that strong asymmetry among countries warrants a change in the rules of the game of global public goods provision with the consequence that cooperation by some countries is bought by others and aggregate welfare is increased perhaps substantially side payments on their own have virtually no effect on the outcomes that can be sustained by self enforcing cooperative agreements but when the rules of the game are changed by strong asymmetry when some countries are effectively committed to being non signatories to an agreement eschewing money transfers side payments become the vehicle for increasing participation in a cooperative agreement

predictive testing of consumer choice models not subject to independence of irrelevant alternatives the probabilistic modeling of the relationship between objective or perceived characteristics of multiattribute alternatives and consumer choice is receiving increased attention in marketing and ot

self enforcing environmental agreements and international trade abstract in the basic model of the literature on international environmental agreements ieas barrett 1994 rubio and ulph 2006 the number of signatories of self enforcing ieas does not exceed three if non positive emissions are ruled out we extend that model by introducing a composite consumer good and fossil fuel that are produced and consumed in each country and traded on world markets when signatory countries act as a stackelberg leader and emissions are positive the size of stable ieas may be significantly larger in our model with international trade this would be good news if larger self enforcing ieas would lead to stronger reductions of total emissions unfortunately in the presence of self enforcing ieas total emissions turn out to be only slightly less than in the business as usual scenario independent of the number of signatories we also investigate the role of international trade by comparing our free trade results with the outcome in the regime of autarky our autarky model turns out to be coincident with the basic model of the literature alluded to above we contribute to that literature by showing that in autarky the outcome of self enforcing ieas is also almost the same as in the business as usual scenario

consumer choice process for experience goods an econometric model and analysis in this research the authors develop and execute an econometric framework to model and analyze the consumer choice process for experience products formally the authors develop a multistage model

perceptual position and competitive brand strategy in a two dimensional two brand market brand positioning and competitive reaction are important determinants of optimal brand strategy analyses of brand strategy have focused on optimal pricing and positioning issues using either empirical models of perceptions and preferences game theory to examine competition or both however the important issues of advertising and distribution strategy have not been fully addressed this paper analyzes competition and strategy between two brands that compete in a two dimensional market with advertising and distribution spending in addition to prices and product positions in particular for a unimodal taste distribution of ideal points we show how optimal competitive nash equilibrium marketing mix levels and profits depend on the positions of both brands brands can reposition to increase profit and under what conditions these strategies imply minimum versus maximum differentiation positioning equilibria and how the intensity of advertising and distribution competition affect equilibrium brand positions

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions

a model of balanced choice behavior in some product categories consumers appear to alternate among items in a consistent and purposeful though not entirely deterministic fashion such alternation occurs even in the absence of any apparent external influences on choice to explain such balanced choice behavior we present a model based upon the premise that past consumption influences the utility of items on subsequent choice occasions individuals may seek variety on certain product attributes and exhibit loyalty toward others the model specification yields a logit choice model which may be calibrated using consumption diary panel data at the individual or cross sectional level

modeling manufacturing and marketing options in international operations abstract in this paper we model and compare eight manufacturing marketing options that a firm with operations in two countries termed as an international enterprise may adopt manufacturing factors incorporated in the model include factory location inventory economies of scale product design and postponement marketing factors include product positioning and pricing the model also includes international factors such as the exchange rate and transportation cost the first two options are termed core product options where the international enterprise manufactures a core product in a single facility located in one of the countries under the first core product option this facility also performs additional operations on the core product to develop custom tailored products under the second core product option customization of the core product takes place in facilities located in both countries the other six options are characterized by standardization customization of product and pricing policies as well as centralization decentralization of the production function the main result of the analysis is that under certain production related conditions the core product options dominate the other six manufacturing marketing options this result has significant managerial implications since it suggests that the core product options exploit the best of both worlds customized pricing and product policies as well as savings derived from economies of scale from the centralized production of the core product

the case for international emission trade in the absence of cooperative climate policy we evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self interest to do so we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies countries decisions about their participation in a trading system and about their initial permit endowment are made noncooperatively so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains despite this we find that emission trade agreements can be effective that smaller groupings pairing developing and developed world partners often perform better than agreements with larger rosters and that general equilibrium responses play an important role in shaping these outcomes