Statistical network models allow us to study the co-evolution between the products and the social aspects of a market system, by modeling these components and their interactions as graphs. In this paper, we study competition between different car models using network theory, with a focus on how product attributes (like fuel economy and price) affect which cars are considered together and which cars are finally bought by customers. Unlike past work, where most systems have been studied with the assumption that relationships between competitors are binary (i.e., whether a relationship exists or not), we allow relationships to take strengths (i.e., how strong a relationship is). Specifically, we use valued Exponential Random Graph Models and show that our approach provides a significant improvement over the baselines in predicting product co-considerations as well as in the validation of market share. This is also the first attempt to study aggregated purchase preference and car competition using valued directed networks.
A Weighted Statistical Network Modeling Approach to Product Competition Analysis
Statistical network models have been used to study the competition among different products and how product attributes influence customer decisions. However, in existing research using network-based approaches, product competition has been viewed as binary (i.e., whether a relationship exists or not), while in reality, the competition strength may vary among products. In this paper, we model the strength of the product competition by employing a statistical network model, with an emphasis on how product attributes affect which products are considered together and which products are ultimately purchased by customers. We first demonstrate how customers’ considerations and choices can be aggregated as weighted networks. Then, we propose a weighted network modeling approach by extending the valued exponential random graph model to investigate the effects of product features and network structures on product competition relations. The approach that consists of model construction, interpretation, and validation is presented in a step-by-step procedure. Our findings suggest that the weighted network model outperforms commonly used binary network baselines in predicting product competition as well as market share. Also, traditionally when using binary network models to study product competitions and depending on the cutoff values chosen to binarize a network, the resulting estimated customer preferences can be inconsistent. Such inconsistency in interpreting customer preferences is a downside of binary network models but can be well addressed by the proposed weighted network model. Lastly, this paper is the first attempt to study customers’ purchase preferences (i.e., aggregated choice decisions) and car competition (i.e., customers’ co-consideration decisions) together using weighted directed networks.
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- NSF-PAR ID:
- 10324178
- Editor(s):
- Suweis, Samir
- Date Published:
- Journal Name:
- Complexity
- Volume:
- 2022
- ISSN:
- 1076-2787
- Page Range / eLocation ID:
- 1 to 16
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1155/2022/9417869
