Estimating marketing response models by MCMC

Abstract

Supply and demand systems in economics often come with restrictions that are difficult to estimate with classical methods. The approach of sales response function (SRF) models of Baier and Polasek (2010) is adapted to time series observation of beer sales in a simultaneous equation system. We propose a new class of growth sales (gSRF) models having endogenous and exogenous variables as in Polasek (2011) together with marketing efforts that follow a sustained growth allocation principle. This approach allows us to model growth rates in markets that are exposed to fierce competition and where marketing efforts cannot be evaluated directly. The class of gSRF models has the property that it models supply (i.e., marketing efforts) and demand factors jointly in a log-linear regression model that are correlated over time. The estimated model can explain the relative success of marketing expenditures for the shrinking beer market in Germany for the period 1999–2010.