Modeling multiple sources of heterogeneity in multinomial logit models: Methodological managerial issues

The authors offer a framework to specify and estimate various sources of heterogeneity in multinomial logit brand choice models. They let each brand-specific intercept and each parameter of the explanatory variable vector vary randomly across households. In addition, the authors distinguish loyal households from the rest. The present results suggest that incorporating multiple sources of heterogeneity improves the model fit and suggests higher impact of marketing mix elements on brand choice. They highlight the importance of incorporating multiple sources of heterogeneity. The model the authors implement yields valuable managerial insights.