Estimating Store Choices with Endogenous Shopping Bundles and Price Uncertainty

49 Pages Posted: 29 Nov 2013 Last revised: 3 Jun 2017

See all articles by Hyunchul Kim

Hyunchul Kim

Sungkyunkwan University

Kyoo il Kim

Michigan State University - Department of Economics

Date Written: May 31, 2017

Abstract

We develop a structural model of retail store choices for which household shopping plans and price beliefs are endogenously determined. In our model individual households make their store choices based on their expected basket costs, which are determined by their shopping plans and price beliefs. Previous studies use realized purchases as a proxy for unobserved shopping lists and also assume homogenous price expectation across all households over the entire sample period. Our approach improves the measures of expected basket costs by estimating intended shopping lists of households using a duration model and also by constructing household-, time-, store-, and goods-specific price expectations. In our empirical application using a scanner data set, we find that the store choices become significantly more elastic to prices when the correction is applied.

Keywords: Store choice, Expected basket cost, Price expectation, Consumer demand, Supermarket industry

JEL Classification: D1, D8, L1, L8

Suggested Citation

Kim, Hyunchul and Kim, Kyoo il, Estimating Store Choices with Endogenous Shopping Bundles and Price Uncertainty (May 31, 2017). Available at SSRN: https://ssrn.com/abstract=2361305 or http://dx.doi.org/10.2139/ssrn.2361305

Hyunchul Kim (Contact Author)

Sungkyunkwan University ( email )

110-745 Seoul
Korea

Kyoo il Kim

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
89
Abstract Views
575
rank
299,946
PlumX Metrics