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Modeling Heterogeneity and State Dependence in Consumer Choice Behavior

Michael Keane ()

Journal of Business & Economic Statistics, 1997, vol. 15, issue 3, 310-27

Abstract: In frequently-purchased-consumer-goods markets, consumer brand choices exhibit substantial persistence across purchase occasions. In this article, the author estimates a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence, using Nielsen scanner data on ketchup. He finds evidence for true state dependence in the choice process, even after controlling for a rich heterogeneity structure. Simulation of the model indicates that the long-term effect of a promotion-induced purchase on future purchase probabilities is positive but small.

Date: 1997
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