Investigating consumers' purchase incidence, brand choice and purchase quantity decisions in frequently purchased categories---implications for pricing and promotional policies for retailers and manufacturers

This thesis investigates implications for pricing and promotional policies for retailers and manufacturers in frequently purchased categories based on demand models that incorporate consumers' three purchase decisions, i.e., purchase incidence, brand choice and purchase quantity decisions in a structural framework.;In the first chapter, we study how price promotions in one category affect the three purchase decisions in other category (cross-category effects) and uncover the underlying factors that influence the magnitude of cross category effects. We then translate these factors into managerially relevant covariates and discuss the role of each factor in influencing the cross category effects in each of the three purchase decisions. The factors provide retailers and manufacture a set of qualitative tools to make promotional decisions in a short period of time. We demonstrate the empirical application of our framework on scanner panel data set consisting of two related categories cake mix and cake frosting.;In the second chapter, we proposed a framework to accurately measure price promotion effects of brands on total category sales in presence of consumer unobserved heterogeneity, price endogeneity, and multiple unit purchases in quantity decisions. The magnitudes of price promotional effects of brands in the category on total category sales help retailers to decide whether it is worthwhile to promote that category or not. This is because the retailer may decide not to promote the category at all if the promotional effects of all brands within the category on total category sales are too small. Price promotional effects of individual brands help retailers to decide which particular brand should be promoted should promotion be introduced in the category. We find that in presence of price endogeneity and ignoring multiple units in purchase quantity decision, priced promotional effects are underestimated in all three purchase decisions significantly. We estimate the proposed model on a data set of a product category (yogurt) in which consumers are observed to make multiple unit purchase on a given shopping trip.