Are Complements Really Complementary? An Empirical Structural Estimation of Consumer Purchase Behavior across Product Categories

45 Pages Posted: 6 Dec 2023

See all articles by Xingyue (Luna) Zhang

Xingyue (Luna) Zhang

University of Washington Tacoma

Daisy Dai

Purdue University, Krannert School of Management

Yuliang Oliver Yao

University of Delaware

Date Written: November 29, 2023

Abstract

Consumers make multicategory purchase decisions during a shopping trip. Understanding consumer multicategory decision helps retailers to determine the inventory level of different categories and manufactures who sell products in multiple categories (e.g., Colgate sell both toothbrushes and toothpastes) to rationalize their pricing and supply chain strategies. Using large-scale, transaction level data from one of the largest supermarket chains in China, we examined consumer purchase behavior across different consumer packaged good categories. Our findings suggest that the complements-in-use (e.g., toothbrushes and toothpastes) may not be complements-in-purchase. We further discussed how price and product availability of one category affect the demand for the other category. Through consumer welfare analysis, we show that consumers are hurt by price increase.

Keywords: Cross-Category Demand, Empirical Study, Structural Model, Price Elasticity, Stockout

Suggested Citation

Zhang, Xingyue and Dai, Daisy and Yao, Yuliang, Are Complements Really Complementary? An Empirical Structural Estimation of Consumer Purchase Behavior across Product Categories (November 29, 2023). Available at SSRN: https://ssrn.com/abstract=4647611 or http://dx.doi.org/10.2139/ssrn.4647611

Xingyue Zhang (Contact Author)

University of Washington Tacoma ( email )

1900 Commerce St
Tacoma, WA 18015
United States

Daisy Dai

Purdue University, Krannert School of Management ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Yuliang Yao

University of Delaware ( email )

Newark, DE 19711
United States

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