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Short Run Needs and Long Term Goals: A Dynamic Model of Thirst Management

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Author Info

  • Guofang Huang

    ()
    (School of Management, Yale University)

  • Ahmed Khwaja

    ()
    (School of Management, Yale University)

  • K. Sudhir

    ()
    (School of Management, Yale University)

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    Abstract

    Beverage consumption occurs many times a day in response to a variety of needs that change throughout the day. In making their choices, consumers self-regulate their consumption by managing short run needs (e.g., hydration and mood pickup) with long-term goals (e.g., health). Using unique intra-day beverage consumption, activity and psychological needs data, we develop and estimate a model of high frequency consumption choices that accounts for both intra-day changes in short run needs and individual level unobserved heterogeneity in the degree of self-regulation. A novel feature of the model is that it allows for dynamics of consumption and stockpiling at the level of product attributes. The model is used to evaluate introduction of new products in the beverage category and gain insight into the linkage between self-regulation and excess consumption. Broadly, the modeling framework of balancing short run needs with long-term goals has wide ranging applications in choices where long term effects are gradual (e.g., nutrition, exercise, smoking and preventive health care).

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    File URL: http://cowles.econ.yale.edu/P/cd/d18b/d1856.pdf
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    Bibliographic Info

    Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1856.

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    Length: 48 pages
    Date of creation: Mar 2012
    Date of revision:
    Handle: RePEc:cwl:cwldpp:1856

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    Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
    Phone: (203) 432-3702
    Fax: (203) 432-6167
    Web page: http://cowles.econ.yale.edu/
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    Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

    Related research

    Keywords: Dynamic discrete choice; EM algorithm; Self-regulation; Stockpiling; Health care; Needs; Goals; Obesity; Beverages; New product introductions;

    This paper has been announced in the following NEP Reports:

    References

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    1. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
    2. Aguirregabiria, Victor & Mira, Pedro, 2010. "Dynamic discrete choice structural models: A survey," Journal of Econometrics, Elsevier, vol. 156(1), pages 38-67, May.
    3. Khwaja, Ahmed & Silverman, Dan & Sloan, Frank, 2007. "Time preference, time discounting, and smoking decisions," Journal of Health Economics, Elsevier, vol. 26(5), pages 927-949, September.
    4. Brian Wansink & David R. Just & Collin R. Payne, 2009. "Mindless Eating and Healthy Heuristics for the Irrational," American Economic Review, American Economic Association, vol. 99(2), pages 165-69, May.
    5. Erdem, Tulin & Imai, Susumu & Keane, Michael, 2003. "Brand and Quantity Choice Dynamics Under Price Uncertainty," MPRA Paper 52516, University Library of Munich, Germany.
    6. Daniel Houser & Michael Keane & Kevin McCabe, 2002. "Behavior in a dynamic decision problem: An analysis of experimental evidence using a bayesian type classification algorithm," Experimental 0211001, EconWPA.
    7. Pascaline Dupas, 2010. "Short-Run Subsidies and Long-Run Adoption of New Health Products: Evidence from a Field Experiment," NBER Working Papers 16298, National Bureau of Economic Research, Inc.
    8. Peter Arcidiacono & John Bailey Jones, 2003. "Finite Mixture Distributions, Sequential Likelihood and the EM Algorithm," Econometrica, Econometric Society, vol. 71(3), pages 933-946, 05.
    9. Shapiro, Jesse & Glaeser, Edward & Cutler, David, 2003. "Why Have Americans Become More Obese," Scholarly Articles 2640583, Harvard University Department of Economics.
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