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A Rational random behavior model of choice

Author: Vanhonacker, Wilfried R. ; Winer, RussellINSEAD Area: MarketingIn: Applied Stochastic Models and Data Analysis, no. 6, March 1990 Language: EnglishDescription: p. 41-52.Type of document: INSEAD ArticleNote: Please ask the Library for this articleAbstract: In this paper, a Multinomial-Dirichlet-Geometric model of consumer brand choice is developed. This individual-level stochastic choice model is derived as an extension of Theil's theory of rational random behavior. These behavioral assumptions permit modelling of changes in likelihood of purchase as consumers are confronted with environmental factors whose occurrence and exact nature could not be anticipated at the planning stage of a shopping trip. Moreover, the model allows for uncertainties about future events which might impact actual choice to be built into the choice process, alongside a traditional choice model which reflects preferences and/or utilities (and potential uncertainties surrounding them). Empirical results using consumer dairy purchase panel data indicate a strong superiority of the model developed compared with previous models which assume stationary preference vectors
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In this paper, a Multinomial-Dirichlet-Geometric model of consumer brand choice is developed. This individual-level stochastic choice model is derived as an extension of Theil's theory of rational random behavior. These behavioral assumptions permit modelling of changes in likelihood of purchase as consumers are confronted with environmental factors whose occurrence and exact nature could not be anticipated at the planning stage of a shopping trip. Moreover, the model allows for uncertainties about future events which might impact actual choice to be built into the choice process, alongside a traditional choice model which reflects preferences and/or utilities (and potential uncertainties surrounding them). Empirical results using consumer dairy purchase panel data indicate a strong superiority of the model developed compared with previous models which assume stationary preference vectors

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