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Consumer learning and evolution of consumer brand preferences

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  • Hai Che
  • Tülin Erdem
  • T. Öncü

Abstract

We develop a structural dynamic demand model that examines how brand preferences evolve when consumers are uncertain about product quality and their needs change periodically. We allow for strategic sampling behavior of consumers under quality uncertainty and allow for strategic sampling to increase periodically as consumers’ needs change periodically. We differ from previous work on forward-looking consumer Bayesian learning by allowing for 1) spill-over learning effects across different versions of products or products in different product categories that share a brand name and 2) duration-dependence in utility for a specific version of a product or product class to capture systematic periodic changes in consumer utility and migration of consumers across product versions or classes. We also assess the evolution of price elasticities in markets where there is consumer quality uncertainty that diminishes over time as consumers get more experienced. We estimate our model using scanner data for the disposable diapers category and discuss the consumer behavior and managerial implications of our estimation and policy simulation results. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Hai Che & Tülin Erdem & T. Öncü, 2015. "Consumer learning and evolution of consumer brand preferences," Quantitative Marketing and Economics (QME), Springer, vol. 13(3), pages 173-202, September.
    • Handle: RePEc:kap:qmktec:v:13:y:2015:i:3:p:173-202
    DOI: 10.1007/s11129-015-9158-x
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    9. Andrew T. Ching & Tülin Erdem & Michael P. Keane, 2020. "How much do consumers know about the quality of products? Evidence from the diaper market," The Japanese Economic Review, Springer, vol. 71(4), pages 541-569, October.

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