Estimating heterogeneous price thresholds

Nobuhiko Terui, Wirawan Dony Dahana

Research output: Contribution to journalArticlepeer-review

24 Citations (Scopus)

Abstract

A brand choice model with heterogeneous price-threshold parameters is used to investigate a three-regime piecewise-linear stochastic utility function. The model is used to explore the relationships between aspects of consumer price sensitivity and price thresholds using hierarchical Bayes modeling with the Markov chain Monte Carlo (MCMC) method. This study contributes to the modeling literature on discontinuous likelihoods in choice models. The empirical application using our scanner panel data set shows that the reference effect and loss aversion are more marked after price thresholds are taken into heterogeneous price response models. Furthermore, loss aversion is attenuated by using price thresholds than by an aggregate (homogeneity) model without price thresholds.

Original languageEnglish
Pages (from-to)384-391
Number of pages8
JournalMarketing Science
Volume25
Issue number4
DOIs
Publication statusPublished - 2006

Keywords

  • Bayesian MCMC
  • Brand choice
  • Discontinuous likelihoods
  • Heterogeneity
  • Latitude of price acceptance
  • Price threshold
  • Reference effect
  • Scanner panel data

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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