MODELING HETEROGENEITY AND STATE DEPENDENCE IN CONSUMER CHOICE BEHAVIOR

In frequently-purchased-consumer-goods markets, consumer brand choices exhibit substantial persistence across purchase occasions. In this ar ticle, I estimate a choice model that admits of both heterogeneity in preferences and true slate dependence as sources of this persistence, using Nielsen scanner data on ketchup. I find evidence for true state dependence in the choice process, even after controlling for a rich he terogeneity structure. Simulation of the model indicates that the long -term effect of a promotion-induced purchase on future purchase probab ilities is positive but small.