An Integrated Model for Discontinuous Preference Change and Satiation

Nobuhiko Terui, Shohei Hasegawa, Adam N. Smith and Greg M. Allenby

No 70, DSSR Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: We develop a structural model of horizontal and temporal variety seeking using a dynamic factor model that relates attribute satiation to brand preferences. The factor model employs a threshold specification that triggers preference changes when customer satiation exceeds an admissible level but does not change otherwise. The factor model is developed for high dimensional switching data encountered when multiple brands are purchased across multiple time periods. The model is applied to two scanner-panel datasets where we find distinct shifts in consumer preferences over time where consumers are found to value variety much more than indicated by traditional models. Insights into brand preference are provided by a dynamic joint space map that displays brand positions and temporal changes in consumer preferences over time.

Pages: 36 pages
Date: 2017-09-28
New Economics Papers: this item is included in nep-ecm and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:toh:dssraa:70

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