Explaining Preference Heterogeneity with Mixed Membership Modeling

53 Pages Posted: 6 Apr 2016 Last revised: 3 Mar 2017

See all articles by Marc Dotson

Marc Dotson

Brigham Young University

Joachim Büschken

Catholic University of Eichstaett-Ingolstadt

Greg M. Allenby

Ohio State University (OSU) - Department of Marketing and Logistics

Date Written: February 14, 2017

Abstract

Choice models produce part-worth estimates that tell us what product attributes individuals prefer. However, to understand the drivers of these preferences we need to model consumer heterogeneity by specifying covariates that explain cross-sectional variation in the part-worths. In this paper we demonstrate a way to generate covariates for the upper level of a hierarchical Bayesian choice model that leads to an improvement in explaining preference heterogeneity. The covariates are uncovered by augmenting the choice model with a grade of membership model. We find improvement in model fit and inference using the covariates generated with the proposed integrated model over competing models. This paper provides an important step in both a proper accounting for extremes in preference heterogeneity and a continued synthesis between marketing models and mixed membership models, which include models for text data.

Keywords: Choice models, mixed membership models, hierarchical Bayes, grade of membership, preference heterogeneity

Suggested Citation

Dotson, Marc and Büschken, Joachim and Allenby, Greg M., Explaining Preference Heterogeneity with Mixed Membership Modeling (February 14, 2017). Available at SSRN: https://ssrn.com/abstract=2758644 or http://dx.doi.org/10.2139/ssrn.2758644

Marc Dotson (Contact Author)

Brigham Young University ( email )

United States

Joachim Büschken

Catholic University of Eichstaett-Ingolstadt ( email )

Ostenstraße 26
Eichstätt, 85072
Germany

Greg M. Allenby

Ohio State University (OSU) - Department of Marketing and Logistics ( email )

Fisher Hall 524
2100 Neil Ave
Columbus, OH 43210
United States

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