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Research Note—Estimating Heterogeneous Price Thresholds

Author

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  • Nobuhiko Terui

    (Graduate School of Economics and Management, Tohoku University, Sendai 980-8576, Japan)

  • Wirawan Dony Dahana

    (Graduate School of Economics, Osaka University, Osaka 560-0043, Japan)

Abstract

A brand choice model with heterogeneous price-threshold parameters is used to investigate a three-regime piecewise-linear stochastic utility function. The model is used to explore the relationships between aspects of consumer price sensitivity and price thresholds using hierarchical Bayes modeling with the Markov chain Monte Carlo (MCMC) method. This study contributes to the modeling literature on discontinuous likelihoods in choice models. The empirical application using our scanner panel data set shows that the reference effect and loss aversion are more marked after price thresholds are taken into heterogeneous price response models. Furthermore, loss aversion is attenuated by using price thresholds than by an aggregate (homogeneity) model without price thresholds.

Suggested Citation

  • Nobuhiko Terui & Wirawan Dony Dahana, 2006. "Research Note—Estimating Heterogeneous Price Thresholds," Marketing Science, INFORMS, vol. 25(4), pages 384-391, 07-08.
    • Handle: RePEc:inm:ormksc:v:25:y:2006:i:4:p:384-391
    DOI: 10.1287/mksc.1050.0181
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    References listed on IDEAS

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    5. Lee, Sokbae & Seo, Myung Hwan, 2008. "Semiparametric estimation of a binary response model with a change-point due to a covariate threshold," Journal of Econometrics, Elsevier, vol. 144(2), pages 492-499, June.
    6. Rajaguru, Rajesh, 2016. "Role of value for money and service quality on behavioural intention: A study of full service and low cost airlines," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 114-122.
    7. Timothy J. Richards & Miguel I. Gómez & Iryna Printezis, 2016. "Hysteresis, Price Acceptance, and Reference Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 679-706.
    8. Neumann, Nico & Böckenholt, Ulf, 2014. "A Meta-analysis of Loss Aversion in Product Choice," Journal of Retailing, Elsevier, vol. 90(2), pages 182-197.
    9. Junwen Jia & Fang Wu & Hao Yu & Jieming Chou & Qinmei Han & Xuefeng Cui, 2024. "Global meat consumption driver analysis with machine learning methods," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 16(4), pages 829-843, August.
    10. Richards, Timothy J. & Liaukonyte, Jura & Streletskaya, Nadia A., 2016. "Personalized pricing and price fairness," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 138-153.
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