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Measurement of Cannibalism Effects in buying experiments using Mixed Logit Models - The Example of a new Brand of the “Fruits of Lake Constance” Association -

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  • Profeta, Adriano

Abstract

One fundamental assumption of discrete choice regression is the assumption of independence of irrelevant alternatives (IIA). According to the IIA assumption no correlation is allowed between brands in buying experiments. As a consequence, in market simulations all remaining brands gain at the ratio of their starting market share if one brand is excluded from the simulation set. This often does not reflect the reality at the point-of-sale. Mixed-logit models offer the advantage that the IIA-assumption is completely relaxed. What is more, simulations based on mixed logit are able to model cannibalism effects. This paper applies mixed logit to buying behaviour research. A case study is presented where the introduction of a new apple brand at the German discounter “Penny” is simulated in a buying experiment.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20542.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:20542

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Keywords: Mixed Logit Model; IIA-assumption; cannibalism effect; choice experiment; apples;

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  1. Frode Alfnes, 2004. "Stated preferences for imported and hormone-treated beef: application of a mixed logit model," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 19-37, March.
  2. Enneking, Ulrich, 2003. "Die Analyse von Lebensmittelpräferenzen mit Hilfe von Discrete-Choice-Modellen am Beispiel ökologisch produzierter Wurstwaren," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 52(5).
  3. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, April.
  4. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt3tb6j874, University of California Transportation Center.
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