Modeling Consideration Sets and Brand Choice Using Artificial Neural Networks
AbstractThe concept of consideration sets makes brand choice a two-step process. House-holds first construct a consideration set which not necessarily includes all available brands and conditional on this set they make a final choice. In this paper we put forward a parametric econometric model for this two-step process, where we take into account that consideration sets usually are not observed. It turns out that our model is an artificial neural network, where the consideration set corresponds with the hidden layer. We discuss representation, parameter estimation and inference.We illustrate our model for the choice between six detergent brands and show that the model improves upon a one-step multinomial logit model, in terms of fit and out-of-sample forecasting.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2001-10-MKT.
Date of creation: 20 Mar 2001
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brand choice; consideration set; artificial neural network;
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