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A dynamic choice model of hybrid behavior in the attribute-space

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    Abstract

    This paper presents a dynamic choice model in the attribute space considering rational consumers that discount the future. In light of the evidence of several state-dependence patterns, the model is further extended by considering a utility function that allows for the different types of behavior described in the literature: pure inertia, pure variety seeking and hybrid. 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 buys several products simultane-ously. Under the inverted-U marginal utility assumption, the consumer behaves inertial among the existing brands for several periods, and eventually, once the stationary levels are approached, the consumer turns to a variety-seeking behavior. An empirical analysis is run using a scanner database for fabric softener and significant evidence of hybrid behavior for most attributes is found, which supports the functional form considered in the theory.

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    File URL: http://www.econ.upf.edu/docs/papers/downloads/589.pdf
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    Bibliographic Info

    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 589.

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    Date of creation: Nov 2001
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    Handle: RePEc:upf:upfgen:589

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    Web page: http://www.econ.upf.edu/

    Related research

    Keywords: Consumer choice models; state-dependence models; consumption patterns; variety seeking; hybrid behavior;

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    1. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
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    3. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    4. Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
    5. Kapil Bawa, 1990. "Modeling Inertia and Variety Seeking Tendencies in Brand Choice Behavior," Marketing Science, INFORMS, vol. 9(3), pages 263-278.
    6. James M. Lattin, 1987. "A Model of Balanced Choice Behavior," Marketing Science, INFORMS, vol. 6(1), pages 48-65.
    7. Bruce G. S. Hardie & Eric J. Johnson & Peter S. Fader, 1993. "Modeling Loss Aversion and Reference Dependence Effects on Brand Choice," Marketing Science, INFORMS, vol. 12(4), pages 378-394.
    8. Abel P. Jeuland, 1979. "Brand Choice Inertia as One Aspect of the Notion of Brand Loyalty," Management Science, INFORMS, vol. 25(7), pages 671-682, July.
    9. Rogers, Robert D, 1979. " Commentary on "The Neglected Variety Drive"," Journal of Consumer Research, University of Chicago Press, vol. 6(1), pages 88-91, June.
    10. Moshe Givon, 1984. "Variety Seeking Through Brand Switching," Marketing Science, INFORMS, vol. 3(1), pages 1-22.
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