A Joint Framework for Category Purchase and Consumption Behavior

Tinbergen Institute Working Paper No. 2002-124/4

32 Pages Posted: 8 Feb 2003

See all articles by R.D. van Oest

R.D. van Oest

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute

Richard Paap

Erasmus University Rotterdam (EUR) - Department of Econometrics; Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics

Date Written: December 2002

Abstract

We propose a consistent utility-based framework to jointly explain a household's decisions on purchase incidence, brand choice and purchase quantity. The approach differs from other approaches, currently available in the literature, as it is able to take into account consumption dynamics. In the model, households derive utility from consumption, and they relate their purchase behavior to consumption planning. We illustrate our model for yogurt purchases, and show that our model yields important additional insights. One such insight is that the reservation price of households is not fixed, but depends on the available inventory stock. Furthermore, we find that promotional activities increase sales through more purchases in the product category and brand switching, but the effect through larger purchase quantities is limited.

Keywords: purchase incidence, brand choice, purchase quantity, consumption, utility maximization

JEL Classification: C35, C51, D11, D12, M31

Suggested Citation

van Oest, Rutger and Paap, Richard and Franses, Philip Hans, A Joint Framework for Category Purchase and Consumption Behavior (December 2002). Tinbergen Institute Working Paper No. 2002-124/4. Available at SSRN: https://ssrn.com/abstract=362360 or http://dx.doi.org/10.2139/ssrn.362360

Rutger Van Oest (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 8946 (Phone)
+31 10 408 9162 (Fax)

Tinbergen Institute

P.O. Box 1738
H16-32
3000 DR Rotterdam
Netherlands

Richard Paap

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
166
Abstract Views
1,226
rank
180,989
PlumX Metrics