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HLL 2002: Bayesian Statistics in Marketing
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A Bayesian
approach was taken to address, streamline and standardize the methodologies for
solving three specific problems faced by the market research group of HLL. The
problems were, 1) estimation of price elasticity of demand by incorporating
marketeers' subjective input into the observed data; 2) building forecasting
models for sales using price, promotion and macro-economic data; and 3)
detection and estimation of a so-called ``price-threshold''. While the first
problem involved a straight-forward Bayesian regression, after incorporating
the marketeers' beliefs in the prior distribution; the second one involved
development of Bayesian co-integration models with Bayesian model averaging
suggested as the end-result. The third problem was somewhat non-trivial and a
change-point regression model was proposed as a solution, a Bayesian analysis
of which, as is well known, yielded the most satisfactory and easily
interpretable answers. The ``model'' data sets provided by HLL were analyzed
using BUGS, which churned out a lot of interesting and unexpected findings
after a thorough Bayesian analysis.
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