A Model for Trade-Up and Change in Considered Brands
36 Pages Posted: 17 Feb 2008
Date Written: February 1, 2008
Abstract
A common theme in the marketing literature is the acquisition and retention of customers as they trade-up from inexpensive, introductory offerings to those of higher quality. Standard models of choice, however, apply to narrowly defined categories for which assumptions of near-perfect-substitution are valid. We extend the non-homothetic choice model of Allenby and Rossi (1991) to accommodate effects of advertising, professional recommendation and other factors that facilitate the description and management of trade-up. The model is applied to a national study of an over-the-counter health product.
Keywords: Nonhomothetic utility, extended product categories, Bayesian analysis
JEL Classification: C11, C35, M31
Suggested Citation: Suggested Citation
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