Improved customer choice predictions using ensemble methods

Michiel van Wezel and Rob Potharst

No EI 2005-08, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: In this paper various ensemble learning methods from machine learning and statistics are considered and applied to the customer choice modeling problem. The application of ensemble learning usually improves the prediction quality of flexible models like decision trees and thus leads to improved predictions. We give experimental results for two real-life marketing datasets using decision trees, ensemble versions of decision trees and the logistic regression model, which is a standard approach for this problem. The ensemble models are found to improve upon individual decision trees and outperform logistic regression. Next, an additive decomposition of the prediction error of a model, the bias/variance decomposition, is considered. A model with a high bias lacks the flexibility to fit the data well. A high variance indicates that a model is instable with respect to different datasets. Decision trees have a high variance component and a low bias component in the prediction error, whereas logistic regression has a high bias component and a low variance component. It is shown that ensemble methods aim at minimizing the variance component in the prediction error while leaving the bias component unaltered. Bias/variance decompositions for all models for both customer choice datasets are given to illustrate these concepts.

Keywords: Bagging; Bias/Variance decomposition; CART; boosting; brand choice; choice models; data mining; ensembles (search for similar items in EconPapers)
Date: 2005-03-08
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Citations: View citations in EconPapers (2)

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