Testing Models of Strategic Behavior Characterized by Conditional Likelihoods

Thomas Otter, Timothy J. Gilbride () and Greg M. Allenby ()
Additional contact information
Timothy J. Gilbride: Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556
Greg M. Allenby: Fisher College of Business, Ohio State University, Columbus, Ohio 43210

Marketing Science, 2011, vol. 30, issue 4, 686-701

Abstract: Marketing expenditures in the form of pricing, product development, promotion, and channel development are made to maximize profits. A challenge in evaluating the effectiveness of these expenditures is that decisions such as whether to lower prices or run promotions are made based on managers' knowledge of how sensitive consumers are to these marketing activities. Although marketing control variables are explanatory of sales, they are often set in anticipation of a market response, which reflects strategic behavior on the part of a firm. A challenge in developing a model of strategic behavior is that the process by which marketing expenditures are made is often not directly observable. We propose tests for comparing supply-side model formulations in which input variables are strategically determined. In these models, the joint likelihood of demand (y) and supply (x) can be factored into a conditional factor of demand given supply and into a marginal factor of supply. We illustrate our approach using data from a services company that operates in multiple geographic regions.

Keywords: structural models; Bayesian analysis; Bayes factors; model selection (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.1110.0644 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:30:y:2011:i:4:p:686-701

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().