By Dennis Fox
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Extra info for Advanced econometric marketing models
These tests usually concern many parameter restrictions and may therefore have little power. Instead, one may therefore base the lag order determination on Lagrange Multiplier [LM] tests for serial correlation in the residuals, see L¨ utkepohl (1993) and Johansen (1995, p. 22). The advantage of these tests is that they concern less parameter restrictions and hence have more power. We would recommend to start with a model of order 1 and increase the order with 1 until the LM tests do not indicate the presence of any serial correlation.
One hypothesis corresponds to the parameter restriction µ ˜i = µ can also focus on the eﬀect of a single speciﬁc marketing instrument, like the relative (1) (2) price. In that case, the test concerns β˜kji = β˜kji , i = 2, . . , I − 1 and j = 2, . . , I for a speciﬁc marketing instrument k. Finally, we can test for constant variance of the unexplained attractions of the incumbent brands. As stated before, the covariances can be interpreted as measuring the similarity of brands. Testing for the constancy of the covariance structure can therefore be interpreted as testing for constancy of the overall brand positioning.
Only minor changes occur in brand positions and in the sensitivity to marketing activities. Chintagunta (1999) documents that, due to a new brand introduction, price sensitivity tends to increase while promotional sensitivity tends to decrease. As can be understood from the discussion above, Bowman and Gatignon (1996) and Chintagunta (1999) only describe the demand side of the market. That is, these studies focus on the eﬀects on elasticities, where these elasticities may change due to brand repositioning or changes in preference.
Advanced econometric marketing models by Dennis Fox