A Partial-Order-Based Model to Estimate Individual Preferences using Panel Data

Forthcoming, Management Science

55 Pages Posted: 7 Feb 2015 Last revised: 7 Oct 2016

See all articles by Srikanth Jagabathula

Srikanth Jagabathula

New York University (NYU) - Department of Information, Operations, and Management Sciences

Gustavo Vulcano

Universidad Torcuato Di Tella - School of Business

Date Written: July 1, 2016

Abstract

In retail operations, customer choices may be affected by stockout and promotion events. Given panel data with the transaction history of customers, and product availability and promotion data, our goal is to predict future individual purchases.

We use a general nonparametric framework in which we represent customers by partial orders of preferences. In each store visit, each customer samples a full preference list of the products consistent with her partial order, forms a consideration set, and then chooses to purchase the most preferred product among the considered ones. Our approach involves: (a)~defining behavioral models to build consideration sets as subsets of the products on offer, (b)~proposing a clustering algorithm for determining customer segments, and (c)~deriving marginal distributions for partial preferences under the multinomial logit (MNL) model. Numerical experiments on real-world panel data show that our approach allows more accurate, fine-grained predictions for individual purchase behavior compared to state-of-the-art alternative methods.

Keywords: nonparametric choice models, inertia in choice, brand loyalty, panel data, personalized predictions

Suggested Citation

Jagabathula, Srikanth and Vulcano, Gustavo, A Partial-Order-Based Model to Estimate Individual Preferences using Panel Data (July 1, 2016). Forthcoming, Management Science. Available at SSRN: https://ssrn.com/abstract=2560994 or http://dx.doi.org/10.2139/ssrn.2560994

Srikanth Jagabathula (Contact Author)

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States

Gustavo Vulcano

Universidad Torcuato Di Tella - School of Business ( email )

Avda Figueroa Alcorta 7350
Buenos Aires, CABA 1428
Argentina

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