A Category-Level Model of Asymmetric Complements
45 Pages Posted: 28 Apr 2010
Date Written: April 26, 2010
Asymmetric complements refer to goods where one is more dependent on the other, yet consumers receive enhanced benefit from consuming both. Examples include garden hoses and sprinklers, chips and dip, and routine versus personalized services where the former has a broader base for utility generation and the latter is more dependent on the other's presence. Measuring the presence of asymmetries is difficult because it requires longitudinal variation of utility where the degree of inter-dependency changes. We introduce a utility structure with multiplicative demand shocks capable of identifying the origin of demand variation, and investigate the presence of asymmetric complementarity using scanner panel data of cereal and milk purchases. Implications are explored through counterfactual analyses involving cross price elasticities, and spillover effects.
Keywords: Choice model, utility theory, Bayesian estimation
JEL Classification: C11, D12, M31
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