Technical Note—Why Does the NBD Model Work? Robustness in Representing Product Purchases, Brand Purchases and Imperfectly Recorded Purchases

David C. Schmittlein, Albert C. Bemmaor and Donald G. Morrison
Additional contact information
David C. Schmittlein: University of Pennsylvania
Albert C. Bemmaor: Ecole Superieure des Sciences Economiques et Commerciales
Donald G. Morrison: Columbia University

Marketing Science, 1985, vol. 4, issue 3, 255-266

Abstract: One of the most managerially useful constructs that emerge from the stochastic modelling of brand choice is that of conditional expectations. In this paper the conditional expectations are derived for a generalization of the NBD model, called the beta binomial/negative binomial distribution (BB/NBD) model, first described by Jeuland, Bass and Wright. The model, developed to jointly represent the product class purchase and brand selection processes, is also particularly appropriate for analyzing panel data when not every purchase occasion is recorded. The conditional expectations for the NBD model increase linearly with the number of previous purchases made by an individual. Therefore the degree of nonlinearity of the conditional expectations in our more complicated model allows us to assess the robustness of NBD results when in fact the basic assumptions are not true. This paper gives the simple conditions when the NBD will exactly or approximately represent the BB/NBD; and describes the qualitative deviations between these two models when they are not identical.

Keywords: product purchases; brand choice; conditional expectations; NBD model (search for similar items in EconPapers)
Date: 1985
References: Add references at CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.4.3.255 (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:4:y:1985:i:3:p:255-266

Access Statistics for this article

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