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Let's say we have a set of items with no fixed price, and a set of transactions in which these items are sold alone or in combination. How do I go about assigning a value to each of these items?

Take the following example (made up on the fly):

  • Basket 1: x = $5

  • Basket 2: x = $6

  • Basket 3: x,y = $9

  • Basket 4: y,z = $4

  • Basket 5: z = $3

  • Basket 6: z = $4

What is the value of x, y, and z?

Narwe
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1 Answers1

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Answered here: http://www.reddit.com/r/econometrics/comments/2lm1ph/how_to_assign_a_value_to_an_item_with_no_fixed/

"Simple ols with the coefficients being the price and no intercept. So, in your example, X matrix = [ 1 0 0; 1 0 0; 1 1 0;...] And Y matrix being [5; 6; 9;...]"

Narwe
  • 39
  • This might not be a great solution. If we conceive of the prices as varying randomly, with each one varying by about the same amount, then the total prices paid that appear in your dataset will reflect varying numbers of random components, depending on how many items are in each basket. This can be solved with an extension of "simple OLS," such as weighted least squares. – whuber Nov 13 '14 at 21:32