A Purchase Incidence Model with Inverse Gaussian Interpurchase Times

Abstract

Abstract This paper deals with a new purchase incidence model where the interpurchase time of an individual household is described by a two-parameter inverse Gaussian distribution, and the population heterogeneity is modeled by the natural conjugate family which has truncated t and modified gamma marginals. The model, more flexible than the exponential and one-parameter gamma models previously used for purchase incidence, is applied to consumer panel data on toothpaste purchases and an excellent fit is obtained. A more logical approach is employed for the assessment of consumer heterogeneity than the methods in existing literature.