Bayesian Multi-Resolution Spatial Analysis with Applications to Marketing

Marketing researchers have become increasingly interested in spatial datasets. A main challenge of analyzing spatial data is that researchers must a priori choose the size and make-up of the areal units, hence the resolution of the analysis. Analyzing the data at a resolution that is too high may mask “macro” patterns, while analyzing the data at a resolution that is too low may result in aggregation bias. Thus, ideally marketing researchers would want a “data-driven” method to determine the “optimal” resolution of analysis, and at the same time automatically explore the same dataset under different resolutions, to obtain a full set of empirical insights to help with managerial decision making.In this paper, we propose a new approach for multi-resolution spatial analysis that is based on Bayesian model selection. We demonstrate our method using two recent marketing datasets from published studies: (i) the Netgrocer spatial sales data in Bell and Song (2007), and (ii) the Pathtracker® data in Hui et al. (2009b,c) that track shoppers' in-store movements. In both cases, our method allows researchers to not only automatically select the resolution of the analysis, but also analyze the data under different resolutions to understand the variation in insights and robustness to the level of aggregation