Simple approaches to evaluate competing non-nested models in marketing

Abstract

In marketing contexts where no economic or behavioral theory exists to guide researchers, or where there are several competing theories, it is important to explore approaches to compare competing model alternatives. These alternatives are often non-nested; in such cases, recourse to recently developed econometric approaches facilitates comparisons between rival models. Using empirical illustrations (involving sales response, innovation diffusion, and market share models), we highlight the relative simplicity of implementing statistical tests to evaluate competing non-nested model alternatives. This expository review also outlines the focus, scope, merits, and demerits of various tests to compare non-nested models, thereby providing a broad basis for selecting an appropriate test for a given non-nested model-comparison context.