The document discusses various econometric methods used to study markets, including conjoint analysis, factor analysis, discriminant analysis, cost and return analysis, price spreads, producer price index, multiple regression analysis, and marketing efficiency measures like Shepherd's formula and marketing margin-cost ratio. Conjoint analysis determines how people value product attributes. Factor analysis groups correlated variables. Discriminant analysis predicts outcomes for categorical dependent variables. Multiple regression analyzes relationships between independent and dependent metrics. Other sections define key marketing terms and formulas.

1. NEHA W. QURESHI
FEC-PA3-01
CENTRAL INSTITUTE OF
FISHERIES EDUCATION, MUMBAI
ECONOMETRIC METHODS
TO STUDY MARKETS

2. *The application of statistical and mathematical theories to
economics for the purpose of testing hypotheses and
forecasting future trends. Econometrics takes economic
models and tests them through statistical trials. The results
are then compared and contrasted against real-life
examples.
*Econometrics can be subdivided into two major categories:
theoretical and applied.
*Econometrics uses tools such as frequency distributions,
probability and probability distributions, statistical
inference, simple and multiple regression analysis,
simultaneous equations models and time series methods.

3. *
*For Estimation
*For Hypothesis Testing
*For Forecasting
METHODOLOGY OF ECONOMETRICS
* 1. Creating a statement of theory or hypothesis.
*2. Collecting data.
*3. Specifying the mathematical model of theory.
*4. Specifying the statistical, or econometric, model of
theory.
*5. Estimating the parameters of the chosen econometric
model.
*6. Checking for model adequacy: Model specification testing.
*7. Testing the hypothesis derived from the model.
*8. Using the model for prediction or forecasting.

4. *ECONOMETRIC
METHODS USED
IN MARKET
ANALYSIS

5. CONJOINT ANALYSIS
*Conjoint analysis is a statistical technique used in market
research to determine how people value different features
that make up an individual product or service.
*The objective of conjoint analysis is to determine what
combination of a limited number of attributes is most
influential on respondent choice or decision making.
*A controlled set of potential products or services is shown to
respondents and by analyzing how they make preferences
between these products, the implicit valuation of the
individual elements making up the product or service can be
determined.
*These implicit valuations (utilities or part-worths) can be
used to create market models that estimate market share,
revenue and even profitability of new designs.

6. ADVANTAGES DISADVANTAGES
 Estimates psychological tradeoffs
that consumers make when
evaluating several attributes
together
 measures preferences at the
individual level
 uncovers real or hidden drivers
which may not be apparent to the
respondent themselves
 realistic choice or shopping task
 able to use physical objects
 if appropriately designed, the
ability to model interactions
between attributes can be used to
develop needs based segmentation
 designing conjoint studies can be
complex
 with too many options, respondents
resort to simplification strategies
 difficult to use for product positioning
research because there is no procedure
for converting perceptions about actual
features to perceptions about a reduced
set of underlying features
 respondents are unable to articulate
attitudes toward new categories, or may
feel forced to think about issues they
would otherwise not give much thought
to
 poorly designed studies may over-value
emotional/preference variables and
undervalue concrete variables
 does not take into account the number
items per purchase so it can give a poor
reading of market share

7. *
*Factor analysis is multivariate statistical procedure for grouping
variables into subsets such that the variables with each set are
mutually highly correlated, whereas at the same time variables in
different subsets are relatively uncorrelated.
*This technique is
 Usually considered as data reduction tool
 Removes redundancy or duplication from a set of correlated
variables
 Represents correlated variables with a smaller set of “derived”
variables.
 Factors are formed that are relatively independent of one another.

9. *Discriminant Analysis is a multivariate statistical technique
when the dependent variable is categorical and the
independent variables are quantitative.
*Discriminant Function Analysis (DA) undertakes the same task
as multiple linear regression by predicting an outcome .
*In many cases, the dependent variable consists of two groups
or classifications, for example, male versus female, high versus
low or good credit risk versus bad credit risk, therefore to
classify between them we use Linear Discriminant Analysis
(LDA).

10. *To check whether statistically significant differences exist between the
average score profiles on a set of variables for two (or more) defined
groups.
*To check which of the independent variables account the most for the
differences in the average score profiles of the two or more groups.
*Establishing relationship for classifying units into groups on the basis of
their scores on a set of independent variables.
*Knowing the exact composition of the dimensions of discrimination
between groups framed from the set of independent variables.

11. COST AND RETURN ANALYSIS
*Cost and return analysis gives an idea about the investment made
and their outcomes. For estimating net profit using costs and return
analysis, the basic components needed are capital cost, variable
cost, fixed cost, total cost and the revenue.
*Marketing Cost:
C= Cf+Cm1+Cm2+………………+Cmi
Where, C= Total cost of marketing of the
commodity
*Cf = Cost paid by the producer from the time
the produce leaves till he sells it
*Cmi= Cost incurred by the ith middlemen in the
process of buying and selling the products.

12. *
*Margin refers to the difference between the price paid and
received by a specific marketing agency, such as a single
retailer, or by any type of marketing agency such as retailers
or assemblers or by any combination of marketing
agencies such as the marketing system as a whole.
* Absolute margin is expressed in rupees.
* A percentage margin is the absolute difference in price
(absolute margin) divided by the selling price.
* Mark-up is the absolute margin divided by the buying price
or price paid.

13. * The three alternative measures which may be used in estimating market margins
* (a) Absolute margin of ith middlemen (Ami) = Pri ( PPi + Cmi)
* (b) Percentage margin of ith middlemen (Pmi)
* PRi - (PPi + Cmi)
* = --------------------- X 100
* PRi
* (c) Mark-up of ith middleman (M2)
*
* PRi - (PPi + Cmi)
* = -------------------- X 100
* Ppi
* Where,
* PRi = Total value of receipts per unit (sale price)
* Ppi = Purchase value of goods per unit (purchase price)
* Cmi = Cost incurred on marketing per unit.
* The margin includes profit to the middlemen and returns to storage, interest on
capital, overheads and establishment expenditure.

14. *Sum of Average Gross margins
method :
*The average gross margins of all the intermediaries
are added to obtain the total marketing margin as
well as the break up of the consumer‟s rupee :
* n Si - Pi
*MT = Σ ---------
* i=1 Oi
*MT = Total marketing margin.
*Si = Sale value of a product for ith firm
*Pi = value paid by the ith firm
*Qi = Quantity of the product handled by its firm
*i = 1, 2, . . . . n (No. of firms involved in the
marketing channel).

15. PRICE SPREAD
Producer‟s share in consumer‟s rupee
PF
Ps = --- --- x 100
Pr
Where,
*Ps = Producer‟s share
*PF = Price received by the farmer
*Pr = Retail price paid by the consumer

16. *
*This is the net price received by the fish farmer at the time
of first sale
*A family of indexes that measures the average change in
selling prices received by domestic producers of goods and
services over time.
*PPIs measure price change from the perspective of the seller.
*PPI looks at three areas of production: industry-based,
commodity-based, and stage-of-processing-based companies.
*It is one of several price indices.
*Its importance is being undermined by the steady decline in
manufactured goods as a share of spending.

17. *
*To study the influence of different independent variables on
the dependent variable.
*The purpose of multiple regression is to analyze the
relationship between metric or dichotomous independent
variables and a metric dependent variable.
*Multiple regression determines accuracy of the model and
provides predicting values for the dependent variable.

18. Y = a +b1 x1+ b2 x2….+ bn xn + e
* Where,
* Y → is the value of the dependent variable, which is being predicted
or explained
* a → is a constant or intercept on Y axis
* b1 → is the regression coefficient for X1 and indicates the change in Y
for one unit change in X1, controlling for X2, X3, ---------
* X1 → First independent variable that is explaining the variance in Y
* b2 → is the regression coefficient for X2 and indicates the change in Y
for one unit change in X2, controlling for X1, X3, ---------
* X2 → Second independent variable that is explaining the variance in Y
and so on.

19. *
*The marketing function of business strives to identify, or
create, the need for a product, and then to seek out and
inform potential customers in hopes that they might be
persuaded to buy the product.
*This process requires research and analysis on a variety of
elements including: the product, the company, the potential
customers, competition and economic circumstances.

20. *
*It is used to assess the marketing efficiency of the various
marketing channels.
shepherd’s Formula
ME= V - 1
Where,
V= Consumer price
I= Total marketing Cost
I

21. MME = FP
Where, FP= Price received by Producer
MC= Marketing Cost
MM= Marketing margin
MC + MM

22. 1. RANK BASED QUOTIENT
* Rank Based Quotient (RBQ) was used to quantify the
data collected by preferential ranking technique by first
ranking the parameters and then calculating the Rank Based
Quotient (RBQ) given by Sabarathnam (1988), which is as
follows:
* 𝑅. 𝐵. 𝑄 = 𝑓𝑖(𝑛+1−𝑖)
(𝑁×𝑛×100)
*Where,
* fi = Number of fish farmers reporting a particular
problem under ith rank.
* N = number of fish farmers.
* n = number of problems identified.

23. *To find out the most significant factor which influences the respondent,
Garrett’s ranking technique was used. As per this method, respondents
have been asked to assign the rank for all factors and the outcome of such
ranking have been converted into score value with the help of the
following formula:
* Percentage= 100 (Rij – 0.5)
Where, Rij = Rank given for ith item by jth individual
Nj =No. of items ranked by jth individuals
*With the help of Garrett’s Table, the percent position estimated is
converted into scores. Then for each factor, the scores of each individual
are added and then total value of scores and mean values of score is
calculated. The factors having highest mean value is considered to be
the most important factor.
Nj

24. *THANK
YOU