A Model of Brand Choice and Purchase Quantity Price Sensitivities
Many consumer decisions involve a discrete choice and a continuous outcome. Examples of such decisions are whether to own a home or rent one and how much to spend, which brand of orange juice to buy and how many ounces to buy. In cases like these, the choice decision is typically modeled separately, say, using a logit model and the continuous outcomes modeled separately using regression analysis. However, the continuous outcomes may not be independent of the discrete choice and vice versa, and modeling the two decisions independently can lead to inefficient choice parameter estimates and biased and inconsistent regression parameter estimates. In this paper, we present a methodology from the limited-dependent variable literature to model the dependence between the choice and quantity decisions. Our substantive interest is in the role of price in the choice and quantity decisions. When choosing among alternatives, we argue that consumers consider prices of all the competitive brands. In the quantity decision on the other hand, only the price of the chosen alternative is expected to impact how much of the alternative is purchased. The analysis of three brands, using disaggregate level panel data, strongly supports our hypothesis about the role of competitive prices in the choice and quantity decisions.
Volume (Year): 7 (1988)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:7:y:1988:i:1:p:1-20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.