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A Model of Heterogeneous Multicategory Choice for Market Basket Analysis

Author

Listed:
  • Dippold, Katrin
  • Hruschka, Harald

Abstract

Based on market basket data, multicategory purchase incidence models analyze demand interdependencies between product categories. We propose a finite mixture multivariate logit model to derive segment-specific intercategory effects of market basket purchase. Under the assumption that only a fraction of intercategory effects are significant, we exclude irrelevant effects by variable selection. This leads to a detailed description of consumers' shopping behavior that varies over segments not only w.r.t. parameters' values but also w.r.t. included interaction effects. We find that a homogeneous model would overestimate the intensity of interaction between product categories.

Suggested Citation

  • Dippold, Katrin & Hruschka, Harald, 2011. "A Model of Heterogeneous Multicategory Choice for Market Basket Analysis," University of Regensburg Working Papers in Business, Economics and Management Information Systems 456, University of Regensburg, Department of Economics.
    • Handle: RePEc:bay:rdwiwi:20580
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    File URL: https://epub.uni-regensburg.de/20580/1/DP_finmix.pdf
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