A Flexible Model for Consumer Choice in Packaged Goods Markets
INTRODUCTION
Demand analysis has been augmented by the development of choice theory and random utility models (McFadden 1974; 1980; 1986). Today, the multinomial logit (MNL) model is a well-established method for analysing consumer behaviour and the effects of policy variables on consumer demand. However, the MNL postulates symmetric substitutability among products. Such a counter-intuitive restriction severely limits the managerial utility of the model.
Most of today's markets are so competitive that companies cannot hope to dominate the entire market; rather they aim at differentiation by developing specific...