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Measurement of Cannibalism Effects in buying experiments using Mixed Logit Models - The Example of a new Brand of the “Fruits of Lake Constance” Association -

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  • Profeta, Adriano

Abstract

One fundamental assumption of discrete choice regression is the assumption of independence of irrelevant alternatives (IIA). According to the IIA assumption no correlation is allowed between brands in buying experiments. As a consequence, in market simulations all remaining brands gain at the ratio of their starting market share if one brand is excluded from the simulation set. This often does not reflect the reality at the point-of-sale. Mixed-logit models offer the advantage that the IIA-assumption is completely relaxed. What is more, simulations based on mixed logit are able to model cannibalism effects. This paper applies mixed logit to buying behaviour research. A case study is presented where the introduction of a new apple brand at the German discounter “Penny” is simulated in a buying experiment.

Suggested Citation

  • Profeta, Adriano, 2008. "Measurement of Cannibalism Effects in buying experiments using Mixed Logit Models - The Example of a new Brand of the “Fruits of Lake Constance” Association -," MPRA Paper 20542, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20542
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    References listed on IDEAS

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    1. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
    2. Frode Alfnes, 2004. "Stated preferences for imported and hormone-treated beef: application of a mixed logit model," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(1), pages 19-37, March.
    3. Enneking, Ulrich, 2003. "Die Analyse von Lebensmittelpräferenzen mit Hilfe von Discrete-Choice-Modellen am Beispiel ökologisch produzierter Wurstwaren," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 52(05), pages 1-14.
    4. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Mixed Logit Model; IIA-assumption; cannibalism effect; choice experiment; apples;
    All these keywords.

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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