Intra-Household Heterogeneity and Targeting

48 Pages Posted: 5 Jan 2017

See all articles by Hernan Bruno

Hernan Bruno

University of Cologne - Faculty of Management, Economics and Social Sciences

Javier Cebollada

Public University of Navarre, Spain

Pradeep K. Chintagunta

University of Chicago

Date Written: October 1, 2015

Abstract

Using a dataset in which we observe the specific individuals in a household making choices, we study differences in purchase behaviors within and across households in five grocery categories. We develop a choice model that recovers utility parameters from individuals’ choices while allowing for the behavior of individuals from the same household to be correlated via a Bayesian hierarchy. We find that our modeling approach is better at recovering the utility parameters corresponding to each household member’s brand choices especially when we observe few purchase occasions from each of them. The improvement stems from using the household information as a prior for the individual. We find that the within-household heterogeneity in estimated brand intercepts and (to a lesser extent) price sensitivities is about 50% of the across household heterogeneity in these parameters. However, with promotion sensitivities we find within-household heterogeneity to be as large as the across household heterogeneity. We use these estimated utility parameters to compare the expected profitability of promotions targeted at the individual rather than at the household level and find substantial improvements in returns to supermarket promotions. We check the robustness of our results to an alternative model specification and to accounting for possible price endogeneity.

Keywords: Choice Model, Targeting, Heterogeneity

JEL Classification: M31

Suggested Citation

Bruno, Hernan and Cebollada-Calvo, Jose-Javier and Chintagunta, Pradeep K., Intra-Household Heterogeneity and Targeting (October 1, 2015). Available at SSRN: https://ssrn.com/abstract=2892591 or http://dx.doi.org/10.2139/ssrn.2892591

Hernan Bruno (Contact Author)

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Universitätstraße 91
Cologne, D-50931
Germany

Jose-Javier Cebollada-Calvo

Public University of Navarre, Spain ( email )

Campus de Arrosadía
Pamplona, Navarra 31006
Spain

Pradeep K. Chintagunta

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
56
rank
362,018
Abstract Views
499
PlumX Metrics