A Threshold Model for Discontinuous Preference Change and Satiation

Nobuhiko Terui, Shohei Hasegawa and Greg M. Allenby

No 122, TMARG Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: We develop a structural model of horizontal and temporal variety seeking using an 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 can be applied to high dimensional switching data often encountered when multiple brands are purchased across multiple time periods. The model is applied to two panel datasets, an experimental field study and a traditional scanner panel dataset, where we find large improvements in model fit that reflect distinct shifts in consumer preferences over time. The model can identify the product attributes responsible for satiation, and can be used to produce a dynamic joint space map that displays brand positions and temporal changes in consumer preferences over time.

Pages: 38 pages
Date: 2015-10
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:tmarga:122

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