Recent Advances in Structural Econometric Modeling: Dynamics, Product Positioning and Entry

Abstract

In the empirical analysis of consumer markets, recent literature has begun to explore the dynamics in both consumer decisions as well as in firms' marketing policies. Other research has begun to explore the strategic aspects of product line design in a competitive environment. In both cases, structural models have given us new insights into consumer and firm behavior. For example, incorporating consumer and firm dynamics may help explain patterns in our data that are not well-captured by static models. Similarly, the strategic aspects of firm entry and product-positioning may be intrinsically linked to firm conduct and the intensity of competition in a market. Structural analysis of these consumer and firm decisions raise a number of substantial computational challenges. We discuss the computational challenges as well as specific empirical applications. The discussions are based on the session “Structural Models of Strategic Choice” from the 2004 Choice Symposium. Copyright Springer Science + Business Media, Inc. 2005entry, dynamics, market structure, product positioning, structural models,

An Econometric Model of Location and Pricing in the Gasoline Market

“…Models of entry and exit decisions of firms, based on free entry of firms (as opposed to a social planner determining the optimal locations), have been recently proposed by Mazzeo (2002), who models the local market entry decisions of hotels, and by Seim (2004), who models local market entry decisions of video retailers (see Dube, Sudhir et al 2005 for a review of the literature on entry models). Our modeling approach differs from theirs in that we model the location decisions -as opposed to the entry and exit decisions -of a fixed number of gasoline stations in geographic space, using the observed geographic distribution of geo-demographic variables in that space.…”

Valuing Customer Portfolios with Endogenous Mass and Direct Marketing Interventions Using a Stochastic Dynamic Programming Decomposition

“…To include competition, we should consider a behavioral model for several …rms competing for the same customers with mass and customized marketing actions, and the equilibrium would be given by the Markov perfect equilibrium (see Dubé et al 2005). The computational e¤ort to solve this problem is formidable, and the decomposition algorithm presented in this article could be a useful tool to address it.…”

Multiproduct Pricing in Major League Baseball: A Principal Components Analysis

“…Guilietti and Waterson, for example, were forced to aggregate 31 products into seven categories to permit estimation, and utilized industry, rather than firm, elasticities because of data limitations. According to Dubé et al (2005), the problem is magnified when analyzing price dynamics, which has not yet been done using the structural approach.…”