Consumer learning and evolution of consumer brand preferences

Hai Che (), Tülin Erdem () and T. Sabri Öncü
Additional contact information
Hai Che: Indiana University in Bloomington
Tülin Erdem: New York University
T. Sabri Öncü: United Nations Conference on Trade and Development

Quantitative Marketing and Economics (QME), 2015, vol. 13, issue 3, No 1, 173-202

Abstract: 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.

Keywords: Strategic sampling; Spill-over effects; Duration dependence; Consumer choice under uncertainty; Bayesian learning (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11129-015-9158-x

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