CHAID

Example: Opening of Cinema/ Children’s Park/Exhibition Center To find consumer responses to opening of Cinema, Children’s park or Exhibition 903 respondents were asked to rate each alternative on a 5 point scale: 1(v.low) to 5 (v.high) The analyst also collected demographic data on the respondents

Example: Opening of Cinema/ Children’s Park/Exhibition Center Dependent var - % of positive responses Indep variables (with coding in parenthesis) Gender: Male (1), Female (2) Age: (1) (2) (3) (4) (5) (6) 65+ (7) Socio-economic group had 6 categories:A(1), B(2), C1(3), C2(4) etc

Chi-Squared Automatic Interaction Detection(CHAID) CHAID is a dependence method. For given dep var. we want technique that can 1. Indicate indep. var. that most affect dep. var. 2. Identify mkt. segments that differ most on these important. indep. var. Early interaction detection method is AID AID employs hierarchical binary splitting algorithm

CHAID General procedure 1. First select indep. var. whose subgroups differ most w.r.t dep. var. 2. Each subgroup of this var. is further divided into subgroups on remaining variables 3. These subgroups are tested for differences on dep. var. 4. Var. with greatest difference is selected next 5. Continue until subgroups are too small

Automatic Interaction Detection: AID Brief description of AID 1. Designate dep. and indep. Variables 2. Each indep. var. divided into categories 3. Split population into 2 groups on “best”indep. var. 4. Further dichotomize each of these groups successively 5. Continue splitting each resulting subgroups until no indep. var. meets selection criteria

AID Limitations of AID 1. Not a classical statistical model 2. Hypothesis and inference tests not possible 3. Multivariable not multivariate procedure. All variables are not considered simultaneously 4. Does not adjust for fact that there are many ways to dichotomize indep. variable

CHAID CHAID is more flexible than AID Advantages of CHAID over AID 1. All var. dep. or indep. can be categorical 2. CHAID selects indep. var. using Chi- square test. 3. CHAID not restricted to binary splits 4. Solves problem of simultaneous inference using Bonferroni multiplier 5. Automatically tests for and merges pairs of homogenous categories in indep. var.

CHAID CHAID distinguishes 3 types of indep. variables - Monotonic - Free - Floating Basic components of CHAID analysis 1. A categorical dep. var. 2. A set of categorical indep. variables 3. Settings for various CHAID parameters 4. Analyze subgroups and identify “best” indep. var.