Assessing Heterogeneity in Discrete Choice Models Using a Dirichlet Process Prior
Abstract
The finite normal mixture model has emerged as a dominant methodology for assessing heterogeneity in choice models. Although it extends the classic mixture models by allowing within component variablility, it requires that a relatively large number of models be separately estimated and fairly difficult test procedures to determine the “correct†number of mixing components. We present a very general formulation, based on Dirichlet Process Piror, which yields the number and composition of mixing components a posteriori, obviating the need for post hoc test procedures and is capable of approximating any target heterogeneity distribution. Adapting Stephens’ (2000) algorithm allows the determination of ‘substantively’ different clusters, as well as a way to sidestep problems arising from label-switching and overlapping mixtures. These methods are illustrated both on simulated data and A.C. Nielsen scanner panel data for liquid detergents. We find that the large number of mixing components required to adequately represent the heterogeneity distribution can be reduced in practice to a far smaller number of segments of managerial relevance.Download Info
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Bibliographic Info
Article provided by De Gruyter in its journal Review of Marketing Science.
Volume (Year): 2 (2004)
Issue (Month): 1 ()
Pages: 1
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Web page: http://www.degruyter.com
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Web: http://www.degruyter.com/view/j/roms
Related research
Keywords: Choice Models; Heterogeneity; Dirichlet Process; Bayesian Methods; Markov chain Monte Carlo;References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Martin Burda & Artem Prokhorov, 2013.
"Copula Based Factorization in Bayesian Multivariate Infinite Mixture Models,"
Working Papers
tecipa-473, University of Toronto, Department of Economics.
- Martin Burda & Artem Prokhorov, 2012. "Copula Based Factorization in Bayesian Multivariate Infinite Mixture Models," Working Papers 12012, Concordia University, Department of Economics.
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