Ps. Fader et Jm. Lattin, ACCOUNTING FOR HETEROGENEITY AND NONSTATIONARITY IN A CROSS-SECTIONALMODEL OF CONSUMER PURCHASE BEHAVIOR, Marketing science, 12(3), 1993, pp. 304-317
When calibrating a brand choice model cross-sectionally, a measure of
brand loyalty is often introduced into the utility function to account
for differences in utility across households and over time. One of th
e most widely used measures of brand loyalty, proposed by Guadagni and
Little (1983), is an exponential smoothing model of past choice behav
ior by the household. In this study, we argue that the exponential smo
othing model of brand loyalty cannot properly distinguish between sour
ces of variation in utility due to heterogeneity (across households) a
nd sources of variation due to nonstationarity (within household over
time). We introduce a new measure of brand loyalty, derived from a non
stationary Dirichlet-multinomial choice model, in which heterogeneity
and nonstationarity are handled distinctly.