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Endogeneity and Exogeneity in Sales Response Functions

Author

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  • Wolfgang Polasek

    (Institute for Advanced Studies (IHS), Austria; The Rimini Centre for Economic Analysis (RCEA), Italy)

Abstract

Endogeneity and exogeneity are topics that are mainly discussed in macroeconomics. We show that sales response functions (SRF) are exposed to the same problem if we assume that the control variables in a SRF reflect behavioral reactions of the supply side. The supply side actions are covering a flexible marketing component which could interact with the sales responses if sales managers decide to react fast according to new market situations. A recent article of Kao et al. (2005) suggested to use a class of production functions under constraints to estimate the sales responses that are subject to marketing strategies. In this paper we demonstrate this approach with a simple SRF(1) model that contains one endogenous variable. Such models can be extended by further exogenous variables leading to SRF-X models. The new modeling approach leads to a multivariate equation system and will be demonstrated using data from a pharma-marketing survey in German regions.

Suggested Citation

  • Wolfgang Polasek, 2010. "Endogeneity and Exogeneity in Sales Response Functions," Working Paper series 21_10, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:21_10
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    Cited by:

    1. Wolfgang Polasek, 2011. "Marketing Response Models for Shrinking Beer Sales in Germany," Working Paper series 50_11, Rimini Centre for Economic Analysis.

    More about this item

    Keywords

    Sales response functions; stochastic derivative constraints; simultaneous estimation; MCMC; pharma-marketing; model choice;
    All these keywords.

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