Investigating Endogeneity Bias in Marketing
27 Pages Posted: 8 Sep 2006
Date Written: August 2006
The use of adaptive designs in conjoint analysis has been shown to lead to an endogeneity bias in part-worth estimates using sampling experiments. In this paper, we re-examine the endogeneity issue in light of the likelihood principle. The likelihood principle asserts that all relevant information in the data about model parameters is contained in the likelihood function. We show that, once the data are collected, adhering to the likelihood principle leads to analysis where endogeneity becomes ignorable for estimation. The likelihood principle is implicit to Bayesian analysis, and discussion is offered for detecting and dealing with endogeneity bias in marketing.
Keywords: Likelihood principle, adaptive design, Bayes Theorem, directed acyclic graphs
JEL Classification: C11,M31
Suggested Citation: Suggested Citation