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Regression Tree Model for Analysis of Demand with Heterogeneity and Censorship

Author

Listed:
  • Evgeniy M. Ozhegov

    (National Research University Higher School of Economics)

  • Alina Ozhegova

    (National Research University Higher School of Economics)

Abstract
In this research we analyze new approach for prediction of demand. In the studied market of performing arts the observed demand is limited by capacity of the house. Then one needs to account for demand censorhip to obtain unbiased estimates of demand funnction parameters. The presence of consumer segments with dierent purposes of going to the theatre and willingness-to-pay for performance and ticket characteristics causes a heterogeneity in theatre demand. We propose an estimator for prediction of demand that accounts for both demand censorhip and preferences heterogeneity. The estimator is based on the idea of classiffication and regression trees and bagging prediction aggregation extended for prediction of censored data. Our algorithm predicts and combines predictions for both discrete and continuous parts of censored data.We show that our estimator performs better in terms of prediction accuracy compared with estimators which accounts either for censorship, or heterogeneity only. The proposed approach is helpful for finding product segments and optimal price setting.

Suggested Citation

  • Evgeniy M. Ozhegov & Alina Ozhegova, 2017. "Regression Tree Model for Analysis of Demand with Heterogeneity and Censorship," HSE Working papers WP BRP 174/EC/2017, National Research University Higher School of Economics.
  • Handle: RePEc:hig:wpaper:174/ec/2017
    as

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    File URL: https://wp.hse.ru/data/2017/09/14/1173350151/174EC2017.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    demand; performing arts; machine learning; regression tree; censored data; pricing;
    All these keywords.

    JEL classification:

    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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