The Theory of Stochastic Preferences: Further Comments and Clarifications

Abstract

The theory of stochastic preference and brand switching uses market share data and a parameter ρ for generating switching matrices. In particular, ρ facilitates the generation of different matrices for different product categories having similar market shares. The parameter ρ has been termed a measure of product class brand loyalty. Because of the numerous conceptual definitions of brand loyalty, the author provides some additional insights into the meaningful interpretation of ρ. Furthermore, he emphasizes that at a general level a nonhomogeneous multinomial model can be used to represent most of the brand switching models.