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Guadagni and Little (1983) June 8, 2007

Posted by jyu in Qualifying.
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Incorporate heterogeneity in brand preference using observed past brand choice behavior.

Use two variables: brand loyalty and size loyalty (exponentially weighted averages of past brand and brand size-choice) to account for heterogeneity.

Criticism:  The effect of past brand choice on current choice will be overstated if the past choices are not adjusted for the possible effects of PAST price and promotional variables.  Consequently, the effect of some of the other variables included in the model would be understated.

Therefore, the alternative approaches (fixed and random effects) are proposed to account for heterogeneity in the later models. 

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