The demand for food products: An analysis of interpurchase times and purchased quantities

In this paper we study household purchase behaviour of storable food produc ts. An inventory model is developed in which the household chooses an optim al stock level of the product. Storage of the product is costly, there is a fixed cost per purchase occasion, and the market price is sometimes discou nted because of price promotions. We show that the optimal purchase policy is an s, S policy. The model is used to derive predictions on the correlati ons between interpurchase times and purchased quantities on the one hand, a nd prices on the other. These predictions are empirically verified using co nsumer panel data.