2014 Volume 41 Issue 2 Pages 147-167
This paper proposes an integrated purchase model of household category purchase incidence, brand choice, and purchase quantity choice using the Gaussian copula. In contrast to the existing model, we assume the general form of the dependence parameter matrix for Gaussian copula. The proposed approach allows us to decompose the joint probability of the purchase outcomes into the conditional probability of one decision given the others. The price elasticities derived based on these conditional probabilities can fully reflect the underlying dependence among the decisions. The conditional probabilities are also utilized to predict future responses mimicking the sequence of the purchase decisions. The proposed model is applied to scanner panel data for the dishwashing soap category. We find that there exists a very strong positive dependence between incidence and brand choice, while dependence between incidence and quantity choice, and between brand choice and quantity choice is negative. The main sources of the overall behavioral response to price are found to be the incidence and brand choice decisions, while the quantity choice decision is hardly influenced by price change after decisions are made on the category of purchase and brand choice.