49 Pages Posted: 26 Mar 2012
Date Written: March 23, 2012
Beverage consumption occurs many times a day in response to a variety of needs that change throughout the day. In making their choices, consumers self-regulate their consumption by managing short run needs (e.g., hydration and mood pickup) with long-term goals (e.g., health). Using unique intra-day beverage consumption, activity and psychological needs data, we develop and estimate a model of high frequency consumption choices that accounts for both intra-day changes in short run needs and individual level unobserved heterogeneity in the degree of self-regulation. A novel feature of the model is that it allows for dynamics of consumption and stockpiling at the level of product attributes. The model is used to evaluate introduction of new products in the beverage category and gain insight into the linkage between self-regulation and excess consumption. Broadly, the modeling framework of balancing short run needs with long-term goals has wide ranging applications in choices where long term effects are gradual (e.g., nutrition, exercise, smoking and preventive health care).
Keywords: Dynamic discrete choice, EM algorithm, Self-regulation, Stockpiling, Health care, Needs, Goals, Obesity, Beverages, New product introductions
Suggested Citation: Suggested Citation
Submitter, Yale Cowles and Huang, Guofang and Khwaja, Ahmed and Sudhir, K., Short Run Needs and Long Term Goals: A Dynamic Model of Thirst Management (March 23, 2012). Cowles Foundation Discussion Paper No. 1856. Available at SSRN: https://ssrn.com/abstract=2028006 or http://dx.doi.org/10.2139/ssrn.2028006