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.

Additional Metadata
Keywords brand choice, consumption, purchase incidence, purchase quantity
JEL Discrete Regression and Qualitative Choice Models; Discrete Regressors (jel C35), Model Construction and Estimation (jel C51), Consumer Economics: Theory (jel D11), Consumer Economics: Empirical Analysis (jel D12), Marketing and Advertising (jel M3)
Persistent URL hdl.handle.net/1765/6791
Series Tinbergen Institute Discussion Paper Series
Journal Discussion paper / Tinbergen Institute
Citation
van Oest, R.D, Paap, R, & Franses, Ph.H.B.F. (2002). A Joint Framework for Category Purchase and Consumption Behavior (No. TI 02-124/4). Discussion paper / Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/6791