The role of internal reference points in the category purchase decision

The authors study the role that reference effects play in the category purc hase decision for consumer nondurable products. Category purchase behavior is represented by a nested legit model that is estimated on purchase record s of shoppers in two Universal Product Code (UPC) scanner panels. A series of hypotheses are developed, modeled, and tested regarding the effects that internal reference points for product category attractiveness are likely t o have on the decision to buy in a product category on a store visit. The a uthors hypothesize that the difference between a shopper's reference point for category attractiveness and the current level of category attractivenes s will affect the purchase decision. In particular, the extent of purchase postponement caused by a loss (i.e., a negative discrepancy) should exceed the acceleration caused by a gain (i.e., a positive discrepancy), Reference effects on the category purchase decision are also hypothesized to interac t with the shopper's familiarity with the store visited on a given trip. In particular, the impact of losses is predicted to be higher in unfamiliar t han in familiar stores. The authors present model estimates and test result s from two product categories (saltine crackers and liquid laundry detergen t) and find all hypotheses to be supported.