Research Note—Estimating Heterogeneous Price Thresholds
AbstractA brand choice model with heterogeneous price-threshold parameters is used to investigate a three-regime piecewise-linear stochastic utility function. The model is used to explore the relationships between aspects of consumer price sensitivity and price thresholds using hierarchical Bayes modeling with the Markov chain Monte Carlo (MCMC) method. This study contributes to the modeling literature on discontinuous likelihoods in choice models. The empirical application using our scanner panel data set shows that the reference effect and loss aversion are more marked after price thresholds are taken into heterogeneous price response models. Furthermore, loss aversion is attenuated by using price thresholds than by an aggregate (homogeneity) model without price thresholds.
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Bibliographic InfoArticle provided by INFORMS in its journal Marketing Science.
Volume (Year): 25 (2006)
Issue (Month): 4 (07-08)
discontinuous likelihoods; reference effect; price threshold; latitude of price acceptance; brand choice; Bayesian MCMC; heterogeneity; scanner panel data;
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- Sokbae Lee & Myunghwan Seo, 2007.
"Semiparametric Estimation Of A Binaryresponse Model With A Change-Pointdue To A Covariate Threshold,"
STICERD - Econometrics Paper Series
/2007/516, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Lee, Sokbae & Seo, Myung Hwan, 2008. "Semiparametric estimation of a binary response model with a change-point due to a covariate threshold," Journal of Econometrics, Elsevier, vol. 144(2), pages 492-499, June.
- Sokbae Lee & Myung Hwan Seo, 2007. "Semiparametric estimation of a binary response model with a change-point due to a covariate threshold," LSE Research Online Documents on Economics 6806, London School of Economics and Political Science, LSE Library.
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