Demand Estimation and Forecasting Using Neuroeconomic Models of Consumer Choice

36 Pages Posted: 14 Jun 2019

See all articles by Nan Chen

Nan Chen

National University of Singapore (NUS) - School of Computing

John A. Clithero

Lundquist College of Business, University of Oregon

Ming Hsu

University of California, Berkeley - Haas School of Business

Date Written: June 2, 2019

Abstract

A foundational problem in marketing and economics involves accurately predicting purchase decisions at both individual and aggregate levels. Building on recent advances in neuroeconomic models of decision making, we investigate the possibility of improving upon the prediction accuracy of popular existing approaches based on the multinomial logit model (MNL). Specifically, using a neuroeconomic model that incorporates response times in addition to choice data, we compare the out-of-sample prediction accuracy of both approaches using a series of consumer choice experiments. We show that our neuroeconomic model robustly outperformed the standard MNL approach in providing accurate forecasts on diverse measures including revenue, market share, and market cannibalization. Finally, we develop a generalizable framework to assess the relative strengths and weaknesses of our neuroeconomic approach compared to current modeling techniques.

Keywords: demand estimation, forecasting, neuroeconomics, out-of-sample, response times

Suggested Citation

Chen, Nan and Clithero, John A. and Hsu, Ming, Demand Estimation and Forecasting Using Neuroeconomic Models of Consumer Choice (June 2, 2019). Available at SSRN: https://ssrn.com/abstract=3397895

Nan Chen

National University of Singapore (NUS) - School of Computing ( email )

13 Computing Drive
Computing 1
Singapore 117543, 117417
Singapore

HOME PAGE: http://sites.google.com/site/ttnanchen

John A. Clithero (Contact Author)

Lundquist College of Business, University of Oregon ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

Ming Hsu

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

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