Stochastic Model of Inter-purchase Time with Mental Accounting Effect

Abstract

Unlike the principles of traditional economics that substitution possibility holds for goods with monetary equivalency, mental accounting elaborates these goods would have different criteria values to consumers depending on purposes of its use and circumstances at purchase. Aided by modeling of inter-purchase duration that accommodates mental conditions changes captured by two latent variables, i.e. mental loading and household goods stock value, our research primarily intends to reveal how consumer's mental factor impacts consumer purchase behavior. Viewing from behavioral economics, the research attempts to comprehend consumer purchase behaviors that are seemingly irrational from traditional economics viewpoints. The model is derived from threshold-based modeling framework that incorporates consumer heterogeneity in a hierachical Bayesian manner, and modeling parameters are estimated using Markov Chain Monte Carlo (MCMC) mehod. Empirical studies have been exploited with ID-POS data of a retailer shop, and results indicate that our model outperforms by having consumer mental conditions changes into consideration at times of purchase.