A Hierarchical bayes error correction model to explain dynamic effects of price changes

Deskripsi

Among the marketing-mix variables, price and price promotions have the greatest impact on short-term consumer purchase behavior. Systematic relationships between market characteristics and the magnitude of price elasticities have been the focus of many studies. Because the profitability of a promotion largely depends on the long-term effects, providing insights into the determinants of the cumulative effect is of interest to both brand managers and retailers. In this article, the authors analyze which brand- and category-specific characteristics influence the short-term and the long-term effects of price promotions and changes in regular price. The Bayesian estimation results show that the immediate elasticity and the cumulative elasticity of a price discount in the data set under scrutiny are significantly lower than zero. Across brands, the dispersion of the posterior mean of the immediate effect of a price promotion is larger than the dispersion in the posterior mean of the cumulative effect..Printed Journal