Modeling whether, what and how much to buy the right way: An empirical analysis with implications for model building

Ebling, C; Klapper, D

Modeling whether, what and how much to buy the right way: An empirical analysis with implications for model building

Ebling, C

Klapper, D

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Publication Type:: Journal Article
Citation:: Review of Managerial Science, 2010, 4 (3), pp. 171 - 199
Issue Date:: 2010-01-05

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Field	Value	Language
dc.contributor.author	Ebling, C https://orcid.org/0000-0002-8573-6978	en_US
dc.contributor.author	Klapper, D	en_US
dc.date.issued	2010-01-05	en_US
dc.identifier.citation	Review of Managerial Science, 2010, 4 (3), pp. 171 - 199	en_US
dc.identifier.issn	1863-6683	en_US
dc.identifier.uri	http://hdl.handle.net/10453/14040
dc.description.abstract	Whether, what and how much to buy are central decisions in consumer goods markets. Marketing research commonly uses a sequential approach where quantity decision is conditional on purchase incidence and brand choice (e.g., Ailawadi et al. in J Mark Res 44:450-467, 2007). This approach assumes separability between decisions and suffers from selectivity bias. The bias can be overcome by explicitly controlling for it (e.g., Zhang et al. in Rev Mark Sci 3(1), 2005) or by using one unifying utility function, a method considered "state of the art in analyzing purchase behavior in a single product category" (e.g., Song and Chintagunta in J Mark Res 44(4):595-612, 2007). However, this latter method puts restrictive assumptions on the influence of prices on choices, which may affect managerial implications derived from the model results. This study investigates the effect of selectivity bias by comparing the sequential approach-with and without explicitly controlling for endogeneity bias-to the unifying utility function approach. Based on household panel data from three categories, we illustrate the extent to which managerial implications from these frameworks differ. We show that the superiority of one framework versus the other depends on the specific category and its characteristics. The managerial implications of using the "wrong" framework are demonstrated by conducting two simulation studies; these show that price elasticities substantially deviate across frameworks. © 2009 Springer-Verlag.	en_US
dc.relation.ispartof	Review of Managerial Science	en_US
dc.relation.isbasedon	10.1007/s11846-009-0038-1	en_US
dc.title	Modeling whether, what and how much to buy the right way: An empirical analysis with implications for model building	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	4	en_US
utslib.for	1505 Marketing	en_US
utslib.for	1503 Business and Management	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Marketing Discipline
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	4	en_US

Abstract:

Whether, what and how much to buy are central decisions in consumer goods markets. Marketing research commonly uses a sequential approach where quantity decision is conditional on purchase incidence and brand choice (e.g., Ailawadi et al. in J Mark Res 44:450-467, 2007). This approach assumes separability between decisions and suffers from selectivity bias. The bias can be overcome by explicitly controlling for it (e.g., Zhang et al. in Rev Mark Sci 3(1), 2005) or by using one unifying utility function, a method considered "state of the art in analyzing purchase behavior in a single product category" (e.g., Song and Chintagunta in J Mark Res 44(4):595-612, 2007). However, this latter method puts restrictive assumptions on the influence of prices on choices, which may affect managerial implications derived from the model results. This study investigates the effect of selectivity bias by comparing the sequential approach-with and without explicitly controlling for endogeneity bias-to the unifying utility function approach. Based on household panel data from three categories, we illustrate the extent to which managerial implications from these frameworks differ. We show that the superiority of one framework versus the other depends on the specific category and its characteristics. The managerial implications of using the "wrong" framework are demonstrated by conducting two simulation studies; these show that price elasticities substantially deviate across frameworks. © 2009 Springer-Verlag.

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http://hdl.handle.net/10453/14040