A Bayesian Semiparametric Approach For Endogeneity And Heterogeneity In Choice Models
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A Bayesian Semiparametric Approach for Endogeneity and Heterogeneity in Choice Models
Marketing variables that are included in consumer discrete choice models are often endogenous. Extant treatments using likelihood-based estimators impose parametric distributional assumptions, such as normality, on the source of endogeneity. These assumptions are restrictive as misspecified distributions have an impact on parameter estimates and associated elasticities. The normality assumption for endogeneity can be inconsistent with some marginal cost specifications given a price setting process, although being consistent with other specifications. In this paper we propose a heterogeneous Bayesian semiparametric approach for modeling choice endogeneity which offers a flexible and robust alternative to parametric methods. Specifically, we construct centered Dirichlet process mixtures (CDPM) to allow uncertainty over the distribution of endogeneity errors. In a similar vein, we also model consumer preference heterogeneity non-parametrically via a CDPM. Results on simulated data show that incorrect distributional assumptions can lead to poor recovery of model parameters and price elasticities, whereas, the proposed semiparametric model is able to robustly recover the true parameters in an efficient fashion. In addition, the CDPM offers the benefits of automatically inferring the number of mixture components that are appropriate for a given data set and is able to reconstruct the shape of the underlying distributions for endogeneity and heterogeneity errors. We apply our approach to two scanner panel data sets. Model comparison statistics indicate the superiority of the semiparametric specification and the results show that parameter and elasticity estimates are sensitive to the choice of distributional forms. Moreover, the CDPM specification yields evidence of multimodality, skewness, and outlying observations in these real data sets.
Applied Econometric Analysis Using Cross Section and Panel Data
This book is a collection of 20 chapters on chosen topics from cross-section and panel data econometrics. It explores both theoretical and practical aspects of selected cutting-edge techniques which are gaining popularity among applied econometricians, while following the motto of “keeping things simple”. Each chapter gives a basic introduction to one such method, directs readers to supplementary references, and shows an application. The book takes into account that—A: The field of econometrics is evolving very fast and leading textbooks are trying to cover some of the recent developments in revised editions. This book offers basic introduction to state-of-the-art techniques and recent advances in econometric models with detailed applications from various developing and developed countries. B: An applied researcher or practitioner may prefer reference books with a simple introduction to an advanced econometric method or model with no theorems but with a longer discussion on empirical application. Thus, an applied econometrics textbook covering these cutting-edge methods is highly warranted; a void this book attempts to fills.The book does not aim at providing a comprehensive coverage of econometric methods. The 20 chapters in this book represent only a sample of the important topics in modern econometrics, with special focus on econometrics of cross-section and panel data, while also recognizing that it is not possible to accommodate all types of models and methods even in these two categories. The book is unique as authors have also provided the theoretical background (if any) and brief literature review behind the empirical applications. It is a must-have resource for students and practitioners of modern econometrics.
Handbook of Marketing Analytics
Marketing Science contributes significantly to the development and validation of analytical tools with a wide range of applications in business, public policy and litigation support. The Handbook of Marketing Analytics showcases the analytical methods used in marketing and their high-impact real-life applications. Fourteen chapters provide an overview of specific marketing analytic methods in some technical detail and 22 case studies present thorough examples of the use of each method in marketing management, public policy, and litigation support. All contributing authors are recognized authorities in their area of specialty.