Successive Sample Selection and its Relevance for Management Decisions

Forthcoming in Marketing Science

61 Pages Posted: 26 Sep 2012

See all articles by Stephan Wachtel

Stephan Wachtel

Goethe University Frankfurt

Thomas Otter

Goethe University Frankfurt - Department of Marketing

Multiple version iconThere are 2 versions of this paper

Date Written: September 16, 2012

Abstract

We re-analyze endogenous sample selection in the context of customer scoring, targeting, and influencing decisions. Scoring relies on ordered lists of probabilities that customers act in a way that contributes revenues, e.g. purchase something from the firm. Targeting identifies constrained sets of covariate patterns associated with high probabilities of these acts. And influencing aims at changing the probabilities that individual customers act accordingly through marketing activities. We show that successful targeting and influencing decisions require inference that controls for endogenous selection, whereas scoring can proceed relatively successfully based on simpler models that provide (local) approximations, capitalizing on spurious effects of observed covariates. To facilitate the type of inference required for targeting and influencing, we develop a prior that frees the analyst from having to specify (often arbitrary) exclusion restrictions for model identification a priori, or explicitly compare all possible models. We cover both exclusions of observed as well as unobserved covariates that may cause the successive selections to be dependent. We automatically infer the dependence structure among selection stages using MCMC based variable selection, before identifying the scale of latent variables. The adaptive parsimony achieved through our prior is particularly helpful in applications where the number of successive selections exceeds two, a relevant but under-researched situation.

Keywords: Bayesian estimation, Targeting, Cross sectional analysis, Scoring, Causal reasoning, Variable Selection

JEL Classification: C11, C31, C35, C51, C52, M31

Suggested Citation

Wachtel, Stephan and Otter, Thomas, Successive Sample Selection and its Relevance for Management Decisions (September 16, 2012). Forthcoming in Marketing Science. Available at SSRN: https://ssrn.com/abstract=2151862

Stephan Wachtel

Goethe University Frankfurt ( email )

Frankfurt
Germany

Thomas Otter (Contact Author)

Goethe University Frankfurt - Department of Marketing ( email )

Frankfurt
Germany
++49.69.798.34646 (Phone)

HOME PAGE: http://www.marketing.uni-frankfurt.de/index.php?id=97?&L=1

Register to save articles to
your library

Register

Paper statistics

Downloads
80
Abstract Views
780
rank
303,575
PlumX Metrics