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Open AccessArticle

Explaining Consumer Heterogeneity in Structural State-Dependence

by Xiaoyuan Wang 1 and Yan Liu 2,*
1
School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
2
School of Public Affairs and Administration, University of Electronic Science and Technology of China, Chengdu 611731, China
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(7), 2597; https://doi.org/10.3390/su12072597 (registering DOI)
Received: 28 February 2020 / Revised: 18 March 2020 / Accepted: 22 March 2020 / Published: 25 March 2020
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
Consumers are heterogeneous in their inertial responses to previous consumptions. Information on consumers’ structural state-dependence is valuable for evaluating consumers’ habit-forming strength and thus can be used for encouraging more sustainable consumption. Conventional methods of estimating such effects are complex and require repeated purchase data, which is difficult to obtain when consumers are inexperienced in buying sustainable products. In this paper, we utilize consumers’ previous switch behaviour data and investigate whether it can explain heterogeneous state-dependence effects. We demonstrate this in consumer-packaged goods markets using scanner datasets. Consumers’ normalized brand switches in a different product category several years ago are used to measure inter-temporal preference variations that are stable and are independent of products and markets. Accounting for household characteristics, we find that some variation in switch behaviour is highly stable: it explains a significant portion of consumers’ structural state-dependence in the market under investigation. Therefore, consumers’ switch tendencies can be structural to their preference. The finding suggests that incorporating consumers’ switch behaviour from other choice domains can be a simple and effective method of understanding the heterogeneous effects behind habit formation. Our constructed measure has broad implications in shifting consumer behaviour to be more sustainable. View Full-Text
Keywords: heterogeneity; brand switch; structural state-dependence; habit formation; scanner data heterogeneity; brand switch; structural state-dependence; habit formation; scanner data
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Wang, X.; Liu, Y. Explaining Consumer Heterogeneity in Structural State-Dependence. Sustainability 2020, 12, 2597.

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