The link between multiplicative competitive interaction models and compositional data regression with a total

Lukas Dargel and Christine Thomas-Agnan
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Lukas Dargel: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Christine Thomas-Agnan: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This article sheds light on the relationship between compositional data (CoDa) regression models and multiplicative competitive interaction (MCI) models, which are two approaches for modeling shares. We demonstrate that MCI models are particular cases of CoDa models with a total and that a reparameterization links both. Recognizing this relation offers mutual benefits for the CoDa and MCI literature, each with its own rich tradition. The CoDa tradition, with its rigorous mathematical foundation, provides additional theoretical guarantees and mathematical tools that we apply to improve the estimation of MCI models. Simultaneously, the MCI model emerged from almost a century-long tradition in marketing research that may enrich the CoDa literature. One aspect is the grounding of the MCI specification in assumptions on the behavior of individuals. From this basis, the MCI tradition also provides credible justifications for heteroskedastic error structures – an idea we develop further and that is relevant to many CoDa models beyond the marketing context. Additionally, MCI models have always been interpreted in terms of elasticities, a method that has only recently emerged in CoDa. Regarding this interpretation, the CoDa perspective leads to a decomposition of the influence of the explanatory variables into contributions from relative and absolute information.

Keywords: regression; log-ratio; compositional data; MCI; Marketing (search for similar items in EconPapers)
Date: 2024
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Published in Journal of Applied Statistics, 2024, vol.51 (n°14), pp.2929-2960. ⟨10.1080/02664763.2024.2329923⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05471912

DOI: 10.1080/02664763.2024.2329923

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