IDEAS home Printed from https://ideas.repec.org/p/ebg/heccah/1225.html
   My bibliography  Save this paper

A Flexible Demand Model for Complements Using Household Production Theory

Author

Listed:
  • Stourm, Ludovic
  • Iyengar, Raghuram
  • Bradlow, Eric

Abstract

We utilize household production theory to address the problem of micro-level demand estimation across complementary goods. According to this theory, consumers buy inputs and combine them to produce final goods from which they derive utility. We use this idea to build a structural model of demand for complements that can be estimated on purchase data in the presence of corner solutions and indivisible packages. We find that, even when reusing the same functional form as some previous models of demand for substitutes, the model can accommodate very different patterns of consumer preferences over complements and lead to a flexible demand system from perfect complementarity to no complementarity. We estimate the model on purchase data from a panel of consumers and show how it can be used to increase the profitability of couponing strategies by taking into account the spillover effect of coupons on demand for complementary categories.

Suggested Citation

  • Stourm, Ludovic & Iyengar, Raghuram & Bradlow, Eric, 2017. "A Flexible Demand Model for Complements Using Household Production Theory," HEC Research Papers Series 1225, HEC Paris.
    • Handle: RePEc:ebg:heccah:1225
    DOI: 10.2139/ssrn.3024480
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3024480
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.2139/ssrn.3024480?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Utility Theory; Multicategory Demand Models; Bayesian Estimation;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebg:heccah:1225. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Antoine Haldemann (email available below). General contact details of provider: https://edirc.repec.org/data/hecpafr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.