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A Model of Heterogeneous Multicategory Choice for Market Basket Analysis

Katrin Dippold and Harald Hruschka

No 456, University of Regensburg Working Papers in Business, Economics and Management Information Systems from University of Regensburg, Department of Economics

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.

Keywords: Marketing; market basket analysis; finite mixture model; variable selection; multivariate logistic regression; pseudo likelihood estimation; maximum likelihood approximation; multicategory purchase incidence models (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm and nep-mkt
Date: 2011-04-19
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