An Empirical Investigation of the “Dynamic McFadden” Model of Purchase Timing and Brand Choice: Implications for Market Structure

Abstract

Purchase timing and brand-choice decisions of households are jointly investigated using the “dynamic McFadden” model of Heckman and Singer. The hazard of brand purchase is decomposed into the category purchase hazard and the probability of brand choice conditional on category purchase. The former is modeled using the hazard-function approach and the latter using a logit model. Unobserved heterogeneity in brand preferences, marketing effects, and baseline hazard parameters is accounted for in the empirical analysis. The distribution of preference heterogeneity identifies the locations of brands in multiattribute perceptual space and the distribution of attribute importance weights across households.

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