Predicting Choice Shares Under Conditions of Brand Interdependence

Abstract

The authors discuss some shortcomings of probabilistic choice models which do not capture product interdependencies. When substitutional relationships are present in the marketplace, these models may lead to biased estimates for choice/market shares. A probabilistic choice model which accounts for the interdependence among choice alternatives is proposed. This model uses parsimonious parameterization and relies on parameters which are not related to specific alternatives in the choice set.

The model is compared with two other probabilistic choice models in terms of goodness of fit and predictive ability.