Course Professor Term Meetings

MAS 6V05 Consumer Choice Behavior Brian Ratchford Fall 2011 T 1:00 PM -3:45 PM

Professors Contact Information 972-883-5975 Office Phone 972-473-9384 Other Phone SOM 3.707 Office Location Btr051000@utdallas.edu Email Address T 4:00-6:30 or when I am in my office Office Hours

General Course Information Pre-requisites, CoStatus as PhD student requisites, & other restrictions This course will study and discuss approaches to modeling consumer choice behavior that are particularly useful in marketing, and study the relation between consumer choices and price, promotion, advertising, and product innovations and characteristics. Given consumer response, we will also consider the supply side of the market, competitive behavior, and the behavior of channels of distribution. Both theoretical and empirical models of competitive behavior will be discussed. There are two main objectives. One is to provide students with a working knowledge of models of consumer choice behavior, and procedures for estimating them. These include methods for dealing with heterogeneity and state dependence, and popular approaches to estimating structural models of market behavior. It is necessary to have this knowledge to understand the literature on decision support systems for marketing applications. The second major objective is to familiarize students with applications of these models to solving marketing problems in the major areas of marketing. These include pricing, promotions, advertising, new product development and forecasting, retail channels, and targeting and valuing customers. Outside readings that can be downloaded or will be handed out. Kenneth Train, Discrete Choice Models with Simulation, 2003. May be downloaded from his web site at Department of Economics, U.C. Berkeley. Alternatively, I can supply a zip file containing the text.

Course Description

Learning Outcomes

Required Materials

Text

Assignments & Academic Calendar August 30 Introduction Train, Ch. 1-2. and Choice Models Train, Ch. 3. September 6 Logit Models Guadagni and Little, A Logit Model of Brand Choice Calibrated on Scanner Data, MKS, 27 (January/February 2008), 26-48 (includes commentary). Swait and Louviere, The Role of the Scale Parameter in Estimation and Comparison of Multinomial Logit Models, JMR, 30 (August 1993), 305-314.

September 13 Choice Models: Nested Logit and Panel Data

Train, Ch. 4-5. Richards , A Nested Logit Model of Strategic Promotion, Quantitative Marketing And Economics, 5 (March 2007), 63-91 Gupta, Chintagunta, Kaul and Wittink, Do Household Scanner Data Provide Representative Inferences from Brand Choices: A Comparison with Store Data, JMR, 18 (November 1996), 383-398.

September 20 Mixture Models and Non-standard Data

Train, Ch. 6- 7. Kamakura and Russell, A Probabilistic Choice Model for Market Segmentation and Elasticity Structure, JMR, 26 ( November 1989), 379-390. Horsky, Misra and Nelson,Observed and Unobserved Preference Heterogeneity in Brand-Choice Models, MKS, 25 (July/August 2006), 322-335.

September 27 Bayesian Models

Train, Ch. 11-12. Rossi and Allenby, Bayesian Statistics and Marketing, MKS, 22 (Summer 2003), 304-328. Edwards and Allenby, Multivariate Analysis of Multiple Response Data, JMR, 40 (August 2003), 321-334.

October 4 Endogeneity

Train, Ch. 13. Berry, Levinsohn and Pakes, Automobile Prices in Market Equilibrium, Econometrica, 63 (4), 841-849. Goolsbee and Petrin, The Consumer Gains from Direct Broadcast Satellites and Competition with Cable TV, Econometrica, 72 (March 2004), 351-381. Petrin and Train, A Control Function Approach to Endogeneity in Consumer Choice Models, JMR, 47, 1 (Feb. 2010), 3-13.

October 11 Conjoint

Hauser, Note on Conjoint Analysis, unpublished manuscript, MIT (to be made available). Examples at www.sawtoothsoftware.com. Jedidi, Jagpal and Manchanda, Measuring Heterogeneous Reservation Prices for Product Bundles, MKS, 22 (Winter 2003), 107-130.

October 18 Customer Database Analysis

Singh, Hansen and Blattberg, Market Entry and Consumer Behavior: An Investigation of a Wal-Mart Supercenter, MKS, 25 (Sept./Oct. 2006), 457-476. Neslin, Gupta, Kamakura, Lu and Mason, Defection Detection: Measuring and Understanding the Predictive Accuracy of Customer Churn Models, JMR, 43 (May 2006), 204-211. Netzer, Lattin, and Srinivasan, A Hidden Markov Model of Customer Relationship Dynamics, MKS, 27 (March/April 2008), 185-204.

October 25 Response to Promotions and

Ailawadi, Harlam, Cesar, et al., Promotion Profitability For A Retailer: the Role of Promotion, Brand, Category, And Store Characteristics, JMR, 43 (November 2006),

Advertising

518-535. Luan and Sudhir, Forecasting Marketing-Mix Responsiveness for New Products, JMR, 47 (June 2010), 444-457. Goldfarb and Tucker, Online Display Advertising: Targeting and Obtrusiveness, MKS, 30 (May-June 2011), 389-404.

November 1 Long Term Effects

Mela, Gupta and Lehmann, The Long-Term Impact of Promotion and Advertising on Consumer Brand Choice, JMR, 34 (May 1997), 248-261. Pauwels, Hanssens and Siddarth, The Long-Term Effects of Category Incidence, Brand Choice and Purchase Quantity, JMR, 39 (Nov. 2002), 421-439. Srinivasan, Pauwels, Hanssens and Dekimpe, Do Promotions Benefit manufacturers, Retailers, or Both? Management Science, 50, 5 (May 2004), 617-629. Progress Reports on Projects.

November 8 Diffusion

Hauser, Tellis and Griffin, Research on Innovation: A Review and Agenda for Marketing Science, MKS, 25 (November/December 2006), 687-717. Horsky, A Diffusion Model Incorporating Product Benefits, Price, Income and Information, MKS, 9 (4), 1990. Iyengar, Van den Bulte and Valente, Opinion Leadership and Social Contagion in New Product Diffusion, MKS, 30 (2), March/April 2011), 195-212.

November 15 New Product Forecasting

Luo, Kannan and Ratchford, New Product Development under Channel Acceptance, MKS, 26 (March/April 2007), 149-163. Ding and Eliashberg, A Dynamic Competitive Forecasting Model Incorporating Dyadic Decision Making, Management Science, Vol. 54 (April 2008), 820-834. Sood, Gareth and Tellis, Functional Regression: A New Model for Predicting Market Penetration of New Products, MKS, 28, 1 (Jan./Feb. 2009), 36-51.

November 22 Structural Models of Market Behavior

Sudhir, Competitive Pricing Behavior in the Auto Market, MKS, 20 (Winter 2001), 4260. Hitsch, An Empirical Model of Optimal Dynamic Product Launch and Exit Under Demand Uncertainty, MKS, 25 (Jan/Feb 2006), 25-50 Ellickson and Misra, Supermarket Pricing Strategies, MKS, 27 (September/October 2008), 811-828. Sismeiro and Bucklin, Modeling Purchase Behavior at an E-Commerce Web Site: A Task Completion Approach, JMR, 41 (August 2004), 306-323. Godes and Mayzlin, Using Online Conversations to Study Word-of-Mouth Communication, MKS, 23 (Fall 2004), 545-560. Trusov, Bodapati and Bucklin, Determining Influential Users in Internet Social Networks, JMR, 47 (August 2010), 643-658.

November 29 Internet Models

December 6 Sales Force Models

Horsky and Nelson, Evaluating Salesforce Size and Productivity Through Efficient Frontier Benchmarking, MKS, 15 (4), 1996.

Misra, Coughlan and Narasimhan, Salesforce Compensation: An Analytical and Empirical Examination of the Agency Theoretic Approach, QME, 3 (March 2005), 539. Misra and Nair, A Structural Model of Sales-Force Compensation Dynamics: Estimation and Field Implementation, QME (forthcoming) Presentations of Student Projects

Finals week

List of Journals: JMR: Journal of Marketing Research MKS: Marketing Science QME: Quantitative Marketing and Economics Course Policies Students will be required to read and discuss a number of readings which are representative of the literature in the various areas. Each student will be assigned to present a 30 minute summary and critique of a number of readings (the exact number will vary inversely with class size). In addition, each student will be asked to complete a project which ideally will lead to a publication sometime in the future. Projects are discussed in more detail below. The project may use one of the data bases which I have at my disposal to be outlined below. There will be a take home final exam, and 1-3 assignments requiring data analysis. Grades will be based on projects (about 50%), exams/assignments (about 30%), class presentation and participation (about 20%). None None Handled on ad hoc basis I do not want to give incompletes. While you may study anything which is relevant to the course, using any data base, I have a number of data bases at my disposal, and a number of "pet ideas" for projects which use them. I will outline the nature of the data bases and "pet ideas" at greater length to anyone interested in pursuing a particular project. Mandatory Students are expected to be prepared and to participate. N/A The University of Texas System and The University of Texas at Dallas have rules and regulations for the orderly and efficient conduct of their business. It is the responsibility of each student and each student organization to be knowledgeable about the rules and regulations which govern student conduct and activities. General information on student conduct and discipline is contained in the UTD publication, A to Z Guide, which is provided to all registered students each academic year. The University of Texas at Dallas administers student discipline within the procedures of recognized and established due process. Procedures are defined and described in the Rules and Regulations, Board of Regents, The University of Texas System, Part 1, Chapter VI, Section 3, and in Title V, Rules on Student Services and Activities of the universitys Handbook of Operating Procedures. Copies of these rules and regulations are available to students in the Office of the Dean of Students, where staff members are available to assist students in interpreting the rules and regulations (SU 1.602, 972/883-6391). A student at the university neither loses the rights nor escapes the responsibilities

Grading (credit) Criteria

Make-up Exams Extra Credit Late Work

Special Assignments

Class Attendance Classroom Citizenship Field Trip Policies

Student Conduct and Discipline

of citizenship. He or she is expected to obey federal, state, and local laws as well as the Regents Rules, university regulations, and administrative rules. Students are subject to discipline for violating the standards of conduct whether such conduct takes place on or off campus, or whether civil or criminal penalties are also imposed for such conduct. The faculty expects from its students a high level of responsibility and academic honesty. Because the value of an academic degree depends upon the absolute integrity of the work done by the student for that degree, it is imperative that a student demonstrate a high standard of individual honor in his or her scholastic work. Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related to applications for enrollment or the award of a degree, and/or the submission as ones own work or material that is not ones own. As a general rule, scholastic dishonesty involves one of the following acts: cheating, plagiarism, collusion and/or falsifying academic records. Students suspected of academic dishonesty are subject to disciplinary proceedings. Plagiarism, especially from the web, from portions of papers for other classes, and from any other source is unacceptable and will be dealt with under the universitys policy on plagiarism (see general catalog for details). This course will use the resources of turnitin.com, which searches the web for possible plagiarism and is over 90% effective. The University of Texas at Dallas recognizes the value and efficiency of communication between faculty/staff and students through electronic mail. At the same time, email raises some issues concerning security and the identity of each individual in an email exchange. The university encourages all official student email correspondence be sent only to a students U.T. Dallas email address and that faculty and staff consider email from students official only if it originates from a UTD student account. This allows the university to maintain a high degree of confidence in the identity of all individual corresponding and the security of the transmitted information. UTD furnishes each student with a free email account that is to be used in all communication with university personnel. The Department of Information Resources at U.T. Dallas provides a method for students to have their U.T. Dallas mail forwarded to other accounts. The administration of this institution has set deadlines for withdrawal of any college-level courses. These dates and times are published in that semester's course catalog. Administration procedures must be followed. It is the student's responsibility to handle withdrawal requirements from any class. In other words, I cannot drop or withdraw any student. You must do the proper paperwork to ensure that you will not receive a final grade of "F" in a course if you choose not to attend the class once you are enrolled.

Academic Integrity

Email Use

Withdrawal from Class

Procedures for student grievances are found in Title V, Rules on Student Services and Activities, of the universitys Handbook of Operating Procedures. Student Grievance Procedures In attempting to resolve any student grievance regarding grades, evaluations, or other fulfillments of academic responsibility, it is the obligation of the student first to make a serious effort to resolve the matter with the instructor, supervisor, administrator, or committee with whom the grievance originates (hereafter called the respondent). Individual faculty members retain primary responsibility for assigning grades and evaluations. If the matter cannot be resolved at that level, the grievance must be submitted in writing to the respondent with a copy of the

respondents School Dean. If the matter is not resolved by the written response provided by the respondent, the student may submit a written appeal to the School Dean. If the grievance is not resolved by the School Deans decision, the student may make a written appeal to the Dean of Graduate or Undergraduate Education, and the deal will appoint and convene an Academic Appeals Panel. The decision of the Academic Appeals Panel is final. The results of the academic appeals process will be distributed to all involved parties. Copies of these rules and regulations are available to students in the Office of the Dean of Students, where staff members are available to assist students in interpreting the rules and regulations. As per university policy, incomplete grades will be granted only for work unavoidably missed at the semesters end and only if 70% of the course work has been completed. An incomplete grade must be resolved within eight (8) weeks from the first day of the subsequent long semester. If the required work to complete the course and to remove the incomplete grade is not submitted by the specified deadline, the incomplete grade is changed automatically to a grade of F. The goal of Disability Services is to provide students with disabilities educational opportunities equal to those of their non-disabled peers. Disability Services is located in room 1.610 in the Student Union. Office hours are Monday and Thursday, 8:30 a.m. to 6:30 p.m.; Tuesday and Wednesday, 8:30 a.m. to 7:30 p.m.; and Friday, 8:30 a.m. to 5:30 p.m. The contact information for the Office of Disability Services is: The University of Texas at Dallas, SU 22 PO Box 830688 Richardson, Texas 75083-0688 (972) 883-2098 (voice or TTY) Essentially, the law requires that colleges and universities make those reasonable adjustments necessary to eliminate discrimination on the basis of disability. For example, it may be necessary to remove classroom prohibitions against tape recorders or animals (in the case of dog guides) for students who are blind. Occasionally an assignment requirement may be substituted (for example, a research paper versus an oral presentation for a student who is hearing impaired). Classes enrolled students with mobility impairments may have to be rescheduled in accessible facilities. The college or university may need to provide special services such as registration, note-taking, or mobility assistance. It is the students responsibility to notify his or her professors of the need for such an accommodation. Disability Services provides students with letters to present to faculty members to verify that the student has a disability and needs accommodations. Individuals requiring special accommodation should contact the professor after class or during office hours. The University of Texas at Dallas will excuse a student from class or other required activities for the travel to and observance of a religious holy day for a religion whose places of worship are exempt from property tax under Section 11.20, Tax Code, Texas Code Annotated. Religious Holy Days The student is encouraged to notify the instructor or activity sponsor as soon as possible regarding the absence, preferably in advance of the assignment. The student, so excused, will be allowed to take the exam or complete the assignment within a reasonable time after the absence: a period equal to the length of the absence, up to a maximum of one week. A student who notifies the instructor and

Incomplete Grades

Disability Services

completes any missed exam or assignment may not be penalized for the absence. A student who fails to complete the exam or assignment within the prescribed period may receive a failing grade for that exam or assignment. If a student or an instructor disagrees about the nature of the absence [i.e., for the purpose of observing a religious holy day] or if there is similar disagreement about whether the student has been given a reasonable time to complete any missed assignments or examinations, either the student or the instructor may request a ruling from the chief executive officer of the institution, or his or her designee. The chief executive officer or designee must take into account the legislative intent of TEC 51.911(b), and the student and instructor will abide by the decision of the chief executive officer or designee. Off-campus, out-of-state, and foreign instruction and activities are subject to state law and University policies and procedures regarding travel and risk-related activities. Information regarding these rules and regulations may be found at http://www.utdallas.edu/BusinessAffairs/Travel_Risk_Activities.htm. Additional information is available from the office of the school dean.

Off-Campus Instruction and Course Activities

These descriptions and timelines are subject to change at the discretion of the Professor.

Information on Projects
As is standard for Ph.D. seminars, a project is required for this course. The objectives of the project are to get you into independent research early, to help you to develop a deeper understanding of some topic related to the course, and possibly to get you started on something that you might pursue in a summer paper or dissertation. The project might be on any topic related to the course, broadly defined. I will be the final arbiter of the appropriateness of the topic, but will employ a loose definition of relatedness of the topic to the course. Topic areas that are fair game are brand choice, store choice, customer churn, marketing productivity, customer valuation, effects of promotions and advertising, diffusion of innovations, new product forecasting, conjoint, and any other topic that employs a marketing database. Topics will differ as a function of time in the program, and may be related to dissertations of advanced students, or allow beginning students to test their interest in a particular area. Given the orientation of the course, an empirical analysis of some problem related to the course would be most appropriate. However, other types of projects are possible, subject to my approval. While you are welcome to use your own data for the empirical analysis, we have access to a number of datasets that you may use. Given a topic it is usually possible to locate suitable data. See me for information on accessing data on datasets in our possession. Some of these datasets are: Surveys of auto car buyers matched to data on individual car attributes. Data are currently available from surveys conducted in 2000, 2002, 2004, 2006, 2010. Panel data on purchases of a variety of items collected from the Phoenix market. Data on Coke and Pepsi sales of Kroger stores in one region. The data contain one years data on slightly over 100 stores, and include sales, prices, promotional activity and trade area demographics and competition. Projects that show creativity and promise for future development, but may need work on some issues, will be rewarded more than projects that are done correctly but are low on the creativity and promise dimensions. You will note that a time for final presentations has been set on the syllabus. Given that the class is larger than most seminars, more than the 3 hours contained in one class will probably be required for this. While details on presentations will follow, the following timeline for projects will be employed. September 13 one page proposal outlining topic, problem to be addressed, and approach to the problem October 25 (possibly carrying over to November 1) informal 15-20 minute progress report on project outlining progress to date, and problems in need of solution. Finals Week PowerPoint presentation of final results. December 13 - Submit a paper in the format of a Marketing Science article. While there is no specific length requirement, the paper should have an introduction that states the problem to be addressed, literature review, theory/hypotheses, presentation of results, conclusions and suggestions for further research.