Home | Business News | Browse by Publication | M | Marketing Science

Marketing structural models: "keep it real".

Article Excerpt
In their article, "Structural Modeling in Marketing: Review and Assessment," Chintagunta, Erdem, Rossi, and Wedel (2006) provide a comprehensive survey of the contributions to the empirical marketing literature made by researchers using structural econometric modeling. More importantly, their review poses the question of whether structural methods should become more prominent in marketing research. Addressing that question requires a careful consideration of the potential gains of employing structure in this context, as well as the compromises necessary for implementation. Instead of specifically referencing many of the interesting papers cited by the authors, I will focus my comment on evaluating the value of structural approaches in marketing in more general terms.

Key words: structural modeling, empirical industrial organization

1. The Value of Structure: It Depends on What You Want to Know

Most simply put, a structural model uses a behavioral specification of economic agents (consumers and/or firms) to derive a relationship between endogenous and exogenous variables that may be observed by an empirical researcher. Structural models are most typically contrasted with reduced-form empirical approaches, where a "theory-free" statistical analysis is conducted to determine the relationship between economic values of interest. (1) Absent structure, an OLS regression of Y on X will produce the best linear predictor of Y given X. In some contexts--in particular, when the researcher hopes to isolate the correlation of a single variable when the relationships among multiple Xs are confounded--such basic statistical associations are potentially quite useful. If the analyst is convinced that the interactions that produced the data...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!