Empirical Analysis of Consumer Purchase Behavior: Interaction Between State Dependence and Sensitivity to Marketing-Mix Variables¹

¹The article was prepared within the framework of the Academic Fund Program at the National Research University Higher School of Economics (HSE) in 2016 (grant №15-05-0063) and by the Russian Academic Excellence Project “5-100”

ABSTRACT

People are intent to make similar choices especially in consumer goods markets. To address both explanations of this persistence, i.e. state dependence and heterogeneity in preferences, we use random coefficient logit model based on scanner panel data on juice purchases. The product differentiation of the chosen category allows us to model three dimensions of state dependence on brand, size and flavor characteristics. We provide evidence that the persistence in brand choices is positively correlated with persistence in size and flavor choices, thus the consumer pattern is prone to be inertial or variety seeking in every product characteristics. Simultaneously we show that the more sensitive to price and promotional activities consumers are, the less inertial is their behavior.

JEL CLASSIFICATION:

• M31
• D12

KEYWORDS:

• product differentiation
• random coefficient logit
• scanner data
• state dependence