A multi-stage model of choice incorporating reference prices

Most empirical choice models specify simple structures with marketing mix and household descriptors as independent variables and some measure of brand choice as the dependent variable. However, these models are not consistent with buyer behavior models that posit some type of multi-stage choice process with consumers moving through various stages such as perceptions and preferences. In this paper, a multi-stage model incorporating preference measures and reference prices is specified and estimated using consumer scanner panel data featuring household-level advertising exposure measures. Preference is estimated using scaling procedures recently shown to be effective with choice data. The results show empirical support for the model as preferences and reference prices impact household choice shares.

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