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Previous research in marketing has highlighted the role of structural state dependence in consumer choice behavior by showing how consumer's current choices are affected by past purchases. The paper proposes a Bayesian autoregressive spatial choice model in which consumers' product preferences and marketing mix responsiveness co-vary depending upon their relative spatial proximity. It estimates the model using automobile transaction data in the entry-level midsize sedan market using a spatial contiguity matrix based on the previous purchases of individual consumers. Paper also examines a realistic problem faced by one particular manufacturer, which involves setting the optimal financial levels to be offered in various markets.
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