Article ID: | iaor1993476 |
Country: | United States |
Volume: | 10 |
Issue: | 4 |
Start Page Number: | 316 |
End Page Number: | 337 |
Publication Date: | Sep 1991 |
Journal: | Marketing Science |
Authors: | Kahn Barbara E., Raju Jagmohan |
Keywords: | statistics: experiment, behaviour, decision theory |
A stochastic model is proposed to examine how changes in frequency of price discounts affect brand choice decisions of consumers who exhibit variety-seeking and reinforcement behavior. It is shown that the effect on choice depends on whether the brand offering discounts is a major or minor brand in the product category. This model extends the existing literature on stochastic models of variety-seeking behavior by explicitly incorporating switching due to promotions along with intrinsic switching due to variety-seeking. The model yields testable hypotheses which are supported in a laboratory experiment and on analyses of the IRI cracker data.