Stochastic Modeling of Consumer Purchase Behavior: II Applications

35 Pages Posted: 24 Feb 2016

Date Written: July 1, 1981

Abstract

This paper tests four alternative composite models of market behavior over a set of consumer panel data for three product categories (margarine, regular coffee and instant coffee). Three of these models are based on various (Condensed) NBD models to describe product purchase distributions. The fourth composite model involves the compound Inverse Gaussian distribution as a purchase timing model. In each case, the beta binomial distribution represents brand choice. The empirical results demonstrate the robustness of the NBD model to departures from its assumptions. The fit provided by the composite model involving the well-known NBD mode 1 as a purchase incidence model is best among all alternative models. The gamma distribution seems to give a better description of heterogeneity than the natural conjugate family of distribution for the Inverse Gaussian (IG) distribution. On the other hand, the IG distribution provides an adequate fit to individual interpurchase times. However, the superiority of the fit at the individual level does not offset the lack of adequacy of the model for heterogeneity in purchasing behavior across consumers.

Suggested Citation

Bemmaor, Albert C., Stochastic Modeling of Consumer Purchase Behavior: II Applications (July 1, 1981). Available at SSRN: https://ssrn.com/abstract=2736895 or http://dx.doi.org/10.2139/ssrn.2736895

Albert C. Bemmaor (Contact Author)

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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