Investigating Endogeneity Bias in Marketing

27 Pages Posted: 8 Sep 2006  

Qing Liu

University of Wisconsin-Madison

Thomas Otter

Goethe University Frankfurt - Department of Marketing

Greg M. Allenby

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

Date Written: August 2006

Abstract

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

Liu, Qing and Otter, Thomas and Allenby, Greg M., Investigating Endogeneity Bias in Marketing (August 2006). Fisher College of Business Working Paper No. 2006-06-001. Available at SSRN: https://ssrn.com/abstract=928636 or http://dx.doi.org/10.2139/ssrn.928636

Qing Liu

University of Wisconsin-Madison ( email )

United States
608-263-9298 (Phone)

HOME PAGE: http://bus.wisc.edu/faculty/qing-liu

Thomas Otter

Goethe University Frankfurt - Department of Marketing ( email )

Frankfurt
Germany
++49.69.798.34646 (Phone)

HOME PAGE: http://www.marketing.uni-frankfurt.de/index.php?id=97?&L=1

Greg M. Allenby (Contact Author)

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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