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Variety seeking June 9, 2007

Posted by jyu in Qualifying.
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McAlister and Srivastava, 1991:

1. Inertia is the positive effect of past consumption of a brand on the consumer’s current propensity to consume it

2. Variety seeking is the negative effct of past consumption of a brand on the consumer’s current propensity to consume it.

— Givon 1984 accounted for both variety seeking and inertia with a VS parameter (-1<=VS<=1).  VS=1 corresponds to extreme search for variety while VS=-1 corresponds to extreme inertia behavior.  The captures the whole range of dynamic choice behavior of consumers while also nests the zero-order model (VS=0) inside the model.

–Seetharamand and Chintagunta (1998) revised Givon’s model to account for the differential effects of switching to different brands based on the last purchase brand and the effects of marketing variables.  Observed heterogeneity is incorporated by allowing VS to be a function of observed demographic variables of household.  Unobserved heterogeneity is also incorporated by allowing VS to vary randomly across households to a discrete distribution with a finite number of supports.

–Trivedi, Bass, and Rao (1994) proposed a model of stochastic variety-seeking that possesses the unique ability to combine zero-order and first-order behavior through the use of a random variable to model variety-seeking “impulses” on each choice occasion.

From a modeling point of view, variety-seeking and inertia are mostly considered as the opposite ends of the same variable, either ranging from -1 to 1 or from 0 to 1.  The appealing feature of this formulation is to capture the whole range of dynamic choice behavior of consumers, while other stochastic choice models only capture dynamics of one form or the other.

Distinguishing effects:

1. To distinguish variety seeking from preference for multiple brands, Seetharaman and Chintagunta (1998) relaxed Givon’s assumption that the variety seeker’s decision to switch brand is not only based on a desire to switch, but also depend on preference for other brands.  In other word, h could try to switch to a brand that he favors more on average.

2. To distinguish variety seeking from promotion sensitivity, Seetharaman and Chintagunta also accounts for the effects of marketing variables such as features and display in their model

3. To distinguish variety seeking from “loyalty,” both Givon and Seetharaman and Chintagunta adopted either “Theda j” or “Alpha j” in their model to represent individual’s zero-order choice probability.  These brand preferences or brand loyalties are assumed to be constant over time and solely dictate consumer brand choice behavior in the absence of variety seeking and inertia.

These separation are developed to detangle the true effects of variety-seeking or inertia from effects of brand loyalty, brand preference for other brands, and promotion activities.

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