Rutger van Oest () (Tilburg University) Richard Paap () (Faculty of Economics, Erasmus University Rotterdam) Philip Hans Franses () (Faculty of Economics, Erasmus University Rotterdam)
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We propose a consistent utility-based framework to jointly explain a household's decisions on purchase incidence, brand choice and purchase quantity. The approach differs from other approaches, currently available in the literature, as it is able to take into account consumption dynamics. In the model, households derive utility from consumption, and they relate their purchase behavior to consumption planning. We illustrate our model for yogurt purchases, and show that our model yields important additional insights. One such insight is that the reservation price of households is not fixed, but depends on the available inventory stock. Furthermore, we find that promotional activities increase sales through more purchases in the product category and brand switching, but the effect through larger purchase quantities is limited.
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Find related papers by JEL classification: C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
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