Specification and empirical evaluation of a cluster-asymmetry market share model
Abstract
Asymmetric models of market share response allow for specific cross-competitive effects between competitors. Various approaches have been suggested for building asymmetric market share models preserving the properties of logical consistency (i.e., respecting the sum and range constraints on market share) of the popular attraction formulation, including the recent “fully extended” attraction specification by Carpenter et al. (1988). It is argued that these approaches suffer from a number of theoretical or practical difficulties. Using the Nested Logit model as a source of inspiration, this paper introduces a simple and tractable cluster-asymmetric attraction specification for market share response and discusses its properties. The model is also shown to be related to the Cooper et al. approach. The specification is applied and evaluated in the context of a consumer appliance example.