A Direct Utility Model for Asymmetric Complements

Posted: 13 Nov 2013

See all articles by Sanghak Lee

Sanghak Lee

Arizona State University; University of Iowa - Department of Marketing

Jaehwan Kim

Korea University Business School (KUBS)

Greg M. Allenby

Ohio State University (OSU) - Department of Marketing and Logistics

Abstract

A symmetric complements refer to goods where one good is more dependent on the other, yet consumers receive enhanced utility 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 asymmetric effects is difficult when all that is observed are the purchase quantities present in a consumer's market basket. We propose a direct utility model with a latent decision sequence for measuring asymmetric effects that allows us to capture differential responses to cross-category purchases and inventories. Scanner panel data of milk and cereal purchases are used to investigate the presence of asymmetric complementarity, and implications are explored through counterfactual analyses involving cross-price elasticities and spillover effects of merchandising variables.

Keywords: utility theory, choice modeling, Bayesian estimation, indivisible demand

Suggested Citation

Lee, Sanghak and Kim, Jaehwan and Allenby, Greg M., A Direct Utility Model for Asymmetric Complements. Marketing Science, Vol. 32, No. 3, 2013; pp. 454-470; DOI: 10.1287/mksc.2013.0782. Available at SSRN: https://ssrn.com/abstract=2329475

Sanghak Lee (Contact Author)

Arizona State University ( email )

Tempe, AZ 85287-4106
United States
480-965-5433 (Phone)

University of Iowa - Department of Marketing ( email )

United States

Jaehwan Kim

Korea University Business School (KUBS) ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea
822.3290.2603 (Phone)
822.922.7220 (Fax)

Greg M. Allenby

Ohio State University (OSU) - Department of Marketing and Logistics ( email )

Fisher Hall 524
2100 Neil Ave
Columbus, OH 43210
United States

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