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Variable selection for market basket analysis

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  • Katrin Dippold
  • Harald Hruschka

Abstract

Results on cross category effects obtained by explanatory market basket analyses may be biased as studies typically investigate only a small fraction of the retail assortment (Chib et al. in Advances in econometrics, vol 16. Econometric models in marketing. JAI, Amsterdam, pp 57–92, 2002 ). We use Bayesian variable selection techniques to determine significant cross category effects in a multivariate logit model. Hence, we achieve a reduction of coefficients to be estimated which decreases computation time heavily and thus allows to consider more product categories than most previous studies. Next to the extension of numbers of categories, the second purpose of this paper is to learn about the capabilities of different variable selection algorithms in the context of market basket analysis. We present three different approaches to variable selection and find that an adaptation of a technique by Geweke (Contemporary Bayesian econometrics and statistics. Wiley, Hoboken, 2005 ) meets the requirements of market basket analysis best, namely high numbers of observations and cross category effects. For a real data set, we show (1) that only a moderate fraction of possible cross category effects are significantly different from zero (one third for our data), (2) that most of these effects indicate complementarity and (3) that the number of considered product categories influences significances of cross category effects. Copyright Springer-Verlag 2013

Suggested Citation

  • Katrin Dippold & Harald Hruschka, 2013. "Variable selection for market basket analysis," Computational Statistics, Springer, vol. 28(2), pages 519-539, April.
  • Handle: RePEc:spr:compst:v:28:y:2013:i:2:p:519-539
    DOI: 10.1007/s00180-012-0315-3
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    References listed on IDEAS

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    1. Dippold Katrin & Hruschka Harald, 2013. "A Model of Heterogeneous Multicategory Choice for Market Basket Analysis," Review of Marketing Science, De Gruyter, vol. 11(1), pages 1-31, September.
    2. Ural Gökay Çiçekli & İnanç Kabasakal, 2021. "Market Basket Analysis of Basket Data with Demographics: A Case Study in E-Retailing," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 9(1), pages 1-12, June.

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