Quality perceptions and asymmetric switching between brands

Quality perceptions and asymmetric switching between brands

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Article ID: iaor1993469
Country: United States
Volume: 10
Issue: 3
Start Page Number: 185
End Page Number: 204
Publication Date: Jun 1991
Journal: Marketing Science
Authors:
Keywords: statistics: empirical, economics, commerce, decision theory, demand
Abstract:

Rotating indifference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model. When calibrated on scanner panel data, the model yields an objective measure of brand quality which is related to the rate of rotation. The model also leads to asymmetric responses to price promotions where switching up to high quality brands is more likely than switching down. The model is capable of nesting the standard logit model, and is similar to a nested logit model when there exists clusters of brands of like quality. The model is used to explore a product line pricing decision where profits are maximized subject to the constraint that consumer utility is maintained.

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