Hybrid Consumption Paths in the Attribute Space: A Model and Application with Scanner Data
AbstractThis paper presents a dynamic choice model in the attribute space considering rational consumers. In light of the evidence of several state-dependence patterns, the standard attribute-based model is extended by considering a general utility function where pure inertia and pure variety-seeking behaviors can be explained in the model as particular linear cases. The dynamics of the model are fully characterized by standard dynamic programming techniques. The model presents a stationary consumption pattern that can be inertial, where the consumer only buys one product, or a variety-seeking one, where the consumer shifts among varied products. We run some simulations to analyze the consumption paths out of the steady state. Under the hybrid utility assumption, the consumer behaves inertially among the unfamiliar brands for several periods, eventually switching to a variety-seeking behavior when the stationary levels are approached. An empirical illustration is run using scanner databases for three different product categories: fabric softener, saltine cracker, and catsup. Non-linear specifications provide the best fit of the data, as hybrid functional forms are found in all the product categories for most attributes and segments. These results reveal the statistical superiority of the non-linear structure and confirm the gradual trend to seek variety as the level of familiarity with the purchased items increases.
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Bibliographic InfoPaper provided by FEDEA in its series Working Papers with number 2008-12.
Date of creation: Feb 2008
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Other versions of this item:
- Sergi Jiménez-Martín & Antonio Ladrón de Guevara, 2008. "Hybrid consumption paths in the attribute space: A model and application with scanner data," Economics Working Papers 1071, Department of Economics and Business, Universitat Pompeu Fabra.
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-DCM-2008-03-08 (Discrete Choice Models)
- NEP-MKT-2008-03-08 (Marketing)
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