Marketing Letters

, Volume 6, Issue 3, pp 199–210 | Cite as

A nested logit model of brand choice incorporating variety-seeking and marketing-mix variables

  • Asim Ansari
  • Kapil Bawa
  • Ayijit Ghosh


We model the effects of variety-seeking and marketing-mix variables on consumers' purchases of coffee using a nested logit model. We premise that on any given purchase occasion, the utilities of brands other than the one purchased on the previous occasion may be correlated due to the consumer's tendency to seek variety or to avoid variety. This results in a two-level hierarchical model where choice on any purchase occasion is conditioned on the brand purchased on the immediately preceding occasion. Such a structure accounts for variety seeking and inertia tendencies of consumers and is consistent with a hierarchical decision process, where consumers first decide whether or not to make a repeat purchase and then decide which brand size to purchase. The assumed hierarchical structure is shown to be consistent with observed coffee purchase behavior, and the model is shown to outperform a nonhierarchical logit model in predicting consumers' brand choices.

Key words

Variety-seeking marketing mix nested logit brand choice 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Allenby, Greg. (1990). “Hypothesis Testing with Scanner Data: The Advantage of Bayesian Methods,”Journal of Marketing Research 27, 379–389.Google Scholar
  2. Bawa, K. (1990). “Modeling Inertia and Variety Seeking Tendencies in Brand Choice Behavior,”Marketing Science 9 (Summer), 263–278.Google Scholar
  3. Ben-Akive, Moshe, and Steven Lerman. (1985).Discrete Choice Analysis: Theory and Applications to Predicting Travel Demand. Cambridge, MA: MIT Press.Google Scholar
  4. Bucklin, Randolph, and Sunil Gupta. (1992). “Brand Choice, Purchase Incidence and Segmentation: An Integrated Approach,”Journal of Marketing Research 29 (May), 201–215.Google Scholar
  5. Bucklin, Randolph, and James Lattin. (1991). “A Two-State Model of Purchase Incidence and Brand choice,”Marketing Science 10, 24–39.Google Scholar
  6. Carpenter, Gregory, and Donald R. Lehmann. (1985). “A Model of Marketing Mix, Brand Switching and Competition,”Journal of Marketing Research 22, (August), 318–329.Google Scholar
  7. Chintagunta, Pradeep. (1992). “Heterogeneity in Nested Logit Models: An Estimation Approach and Empirical Results,”International Journal of Research in Marketing 9, 161–175.Google Scholar
  8. Deighton, John, Caroline Henderson, and Scott Neslin. (1994). “The Effects of Advertising on Brand Switching and Repeat Purchasing,”Journal of Marketing Research 31, 28–43.Google Scholar
  9. Gaudagni, Peter, and Little, John (1983). “A Logit Model of Brand Choice Calibrated on Scanner Data,”Marketing Science 2, 203–238.Google Scholar
  10. Gaudagni, Peter, and John Little. (1987). “When and What To Buy: A Nested Logit Model of Coffee Purchases,” Working Paper 1919–87, Sloan School of Management, Massachusetts Institute of Technology.Google Scholar
  11. Givon, Moshe. (1984). “Variety-Seeking Through Brand Switching,”Marketing Science 3, 1–22.Google Scholar
  12. Gupta, Sunil. (1988). “Impact of Sales Promotion on When, What and How Much to Buy,”Journal of Marketing Research 25 (November), 342–355.Google Scholar
  13. Kahn, Barbara E., Manohar Kalwani, and Donald Morrison. (1986). “Measuring Variety-Seeking and Reinforcement Behaviors Using Panel Data,”Journal of Marketing Research 23, 89–100.Google Scholar
  14. Kahn, Barbara, and Jagmohan S. Raju. (1991). “Effects of Price Promotions on Variety Seeking and Reinforcement Behavior,”Marketing Science 10 (Fall), 316–337.Google Scholar
  15. Kannan, P.K., and G.P. Wright. (1991). “Modeling and Testing Structured Markets: A Nested Logit Approach,”Marketing Science 10 (Winter), 58–82.Google Scholar
  16. Kim, Byung-Do, and Peter E. Rossi. (1994). “Purchase Frequency, Sample Selection, and Price Sensitivity: The Heavy-User Bias,”Marketing Letters 5(1), 57–68.Google Scholar
  17. Krishnamurthi, L., and S.P. Raj. (1988). “A Model of Brand Choice and Purchase Quantity Price Sensitivities,”Marketing Science 7 (Winter), 1–20.Google Scholar
  18. McFadden, D. (1981). “Econometric Models of Probabilistic Choice.” In C. Manski and D. McFadden (Eds.),Structural Analysis of Discrete Data. Cambridge, MA: MIT Press.Google Scholar
  19. Meyer, Robert, and Barbara Kahn. (1991). “Probabilistic Models of Consumer Choice Behavior.” In H. Kassarjian and T. Robertson (Eds.),Handbook of Consumer Behavior: Theoretical and Empirical Constructs. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
  20. Papatla, P., and L. Krishnamurthi. (1992). “A Probit Model of Choice Dynamics,”Marketing Science 11 (Spring), 189–206.Google Scholar

Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • Asim Ansari
    • 1
  • Kapil Bawa
    • 2
  • Ayijit Ghosh
    • 3
  1. 1.University of British ColumbiaUSA
  2. 2.McGill UniversityUSA
  3. 3.Stern School of BusinessNew York UniversityNew York

Personalised recommendations