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Modeling Preference Change through Brand Satiation

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  • Nobuhiko Terui
  • Shohei Hasegawa
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    Abstract

    In this study, we develop structural models of preference change due to consumer state dependence through satiation by purchase experience. A dynamic factor model with switching structure is proposed to explain consumer preference changes. Two types of dynamic factor models are separately applied to baseline and satiation parameters in a direct utility model that accommodates multiple discreteness data. The first dynamic factor model has a switching structure for consumer preference, and decomposes brand baselines into time-invariant factor loadings for the coordinates of brand positions and time-varying factor scores for consumer preference directions. The second dynamic factor model applied to satiation parameters extracts the consumer level of satiation in a product category, and this is used as a causal variable in a switching equation to show when and how preferences change over time according to the level of brand satiation. The brand positions and temporal changes of heterogeneous preferences are jointly depicted in a dynamic joint space map. The empirical analysis of a panel dataset shows that our proposed dynamic model, implying that consumers change their preferences when previous brand satiation exceeds the admissible level and preference directions are determined by the previous level of satiation, performs better than alternative specifications, such as a static model with no preference change and a dynamic model without structures which imply that preference changes whenever a consumer purchases a product.

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    File URL: http://hdl.handle.net/10097/56550
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    File URL: http://ir.library.tohoku.ac.jp/re/bitstream/10097/56550/1/tmarg112.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics and Management, Tohoku University in its series TMARG Discussion Papers with number 112.

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    Length: 29 pages
    Date of creation: Apr 2013
    Date of revision:
    Handle: RePEc:toh:tmarga:112

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    1. McAlister, Leigh & Pessemier, Edgar, 1982. " Variety Seeking Behavior: An Interdisciplinary Review," Journal of Consumer Research, University of Chicago Press, vol. 9(3), pages 311-22, December.
    2. McAlister, Leigh, 1982. " A Dynamic Attribute Satiation Model of Variety-Seeking Behavior," Journal of Consumer Research, University of Chicago Press, vol. 9(2), pages 141-50, September.
    3. Kapil Bawa, 1990. "Modeling Inertia and Variety Seeking Tendencies in Brand Choice Behavior," Marketing Science, INFORMS, vol. 9(3), pages 263-278.
    4. Nobuhiko Terui & Masataka Ban & Toshihiko Maki, 2010. "Finding market structure by sales count dynamics—Multivariate structural time series models with hierarchical structure for count data—," Annals of the Institute of Statistical Mathematics, Springer, vol. 62(1), pages 91-107, February.
    5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    6. David J. Spiegelhalter & Nicola G. Best & Bradley P. Carlin & Angelika van der Linde, 2002. "Bayesian measures of model complexity and fit," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 64(4), pages 583-639.
    7. Tülin Erdem, 1996. "A Dynamic Analysis of Market Structure Based on Panel Data," Marketing Science, INFORMS, vol. 15(4), pages 359-378.
    8. Terry Elrod, 1988. "Choice Map: Inferring a Product-Market Map from Panel Data," Marketing Science, INFORMS, vol. 7(1), pages 21-40.
    9. Bhat, Chandra R., 2005. "A multiple discrete-continuous extreme value model: formulation and application to discretionary time-use decisions," Transportation Research Part B: Methodological, Elsevier, vol. 39(8), pages 679-707, September.
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