Semiparametric Analysis to Estimate the Deal Effect Curve

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Figure 5.5: Beverage data: cross-item deal effect curves a PD b 3 → S c 2 PD4→ S5 a solid line = nonparametric estimate, dashed line = parametric B&W estimate, dotted lines = nonparametric confidence bounds (95%) b,c PD = Price Discount, S = Sales Figure 5.6: Dutch food data: cross-item deal effect curves a PD b 3 → S c 2 PD4→ S3 a solid line = nonparametric estimate, dashed line = parametric B&W estimate, dotted lines = nonparametric confidence bounds (95%) b,c PD = Price Discount, S = Sales The cross-item deal effects tend to show S-shapes in all three product categories. For most cross effects shown in Figures 5.4-5.6, the nonparametric curve is above the parametric one for small and large discounts. Interestingly, the large increase in sales of beverage item 3 with own-item price indices of 0.80 and lower (Figure 5.2), corresponds to a large decrease in sales of item 2 for item 3 price indices of 0.80 and lower (Figure 5.5). 8 8 We could not test Sethuraman’s (1996) theory in our data sets. For instance, the prices are almost 21
5.3.3 Key features We summarize key characteristics of the nonparametric own- and cross-item deal effects, for which the parametric model has significant effects, in Tables 5.4-5.6. For tuna fish, the semiparametric model shows a threshold level for all own- and cross-item effects at about 10 percent (Table 5.4). The saturation level of the own-item effect is around 40 percent (although there is little evidence of saturation effects for items 1 and 3). The cross-item effects show saturation levels varying from 20 to 45 percent. The beverage items show a mixture of (reverse) S-shapedand (reverse-) L-shaped own-item- and cross-item deal effect curves (Table 5.5). For the Dutch food items, the own-item effect thresholds are 5 and 10 percent, and the saturation levels are 15 and 25 percent (Table 5.6). The cross-effects show multiple shapes. Table 5.4: Tuna data: description of deal effect curves a Shape Threshold Saturation level b level b own-item deal effect curves PD 1 → S 1 convex / (reverse S) 10% (45%) c PD 2 → S 2 reverse-S 10% 40% PD 3 → S 3 convex / (reverse S) 10% (40%) cross-item deal effect curves PD 2 → S 1 S + additional decrease from 40% 10% 25% PD 3 → S 1 S 10% 30% PD 1 → S 2 S + additional decrease from 40% 10% 35% PD 3 → S 2 S 10% 40% PD 1 → S 3 S 10% 45% PD 2 → S 3 S + additional decrease from 40% 10% 20% a only those with significant parametric deal effects b rounded to the nearest multiple of 5% c numbers in parentheses indicate uncertainty about the existence of a saturation level 5.3.4 Confidence bounds The width of the confidence bounds varies considerably between items and categories. This width is determined by at least three factors: (1) the number of price discount observations, (2) the distribution of price discounts, and (3) the dimensionality of the nonparametric estimation problem. To illustrate, consider the own-item deal effect curves for tuna fish items 1 and 3 (Figure 5.1). For these items, the average discount percent is the same (see Table 4.1), and so is the dimensionality. equal across items in two of the three data sets (tuna and beverage). In the third data set only the two items with lower regular prices engage in discounting (Dutch food). 22
Page 1 and 2: Semiparametric Analysis to Estimate
Page 3 and 4: 1. Introduction One of the key issu
Page 5 and 6: 2.3 Promotion signal effects Inman,
Page 7 and 8: it is important for researchers to
Page 9 and 10: nonparametric estimators, such as t
Page 11 and 12: applications in North America, Euro
Page 13 and 14: Table 4.2: Description of American
Page 15 and 16: (Table 5.2), while the Dutch food p
Page 17 and 18: 5.2 Predictive validity Since impro
Page 19 and 20: Figure 5.1: Tuna data: own-item dea
Page 21: Figure 5.3: Dutch food data: own-it
Page 25 and 26: Table 5.6: Dutch food data: descrip
Page 27 and 28: Figure 5.8: 3D tuna deal effect sur
Page 29 and 30: index is below 0.55. Thus the displ
Page 31 and 32: Appendix 1: Kernel method 10 Consid
Page 33 and 34: Appendix 2: Estimation procedure fo
Page 35 and 36: Appendix 3: Model operationalizatio
Page 37 and 38: are available for ˆm(x0). The esti
Page 39 and 40: Gupta, Sachin, Pradeep K. Chintagun

Semiparametric Analysis to Estimate the Deal Effect Curve

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