Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 19: Preference Heterogeneity and Habit Persistence: the Case of Breakfast Cereal Consumption

Linda Thunström ()
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Linda Thunström: Department of Economics, Postal: Umeå University, SE-901 87 Umeå, Sweden, and The Swedish Retail Institute (HUI), SE-103 29 Stockholm, Sweden

Abstract: This paper estimates the strength and heterogeneity across households in state dependence associated with breakfast cereal consumption, where positive state dependence implies habit persistence and negative state dependence implies variety-seeking in consumption. The analysis relies on a discrete choice model and finds that breakfast cereal consumption is generally highly habitual, but the degree of habit persistence exhibits heterogeneity across households. In addition, some households can be characterized as variety-seeking. The strength of habit persistence is similar across income and educational groups. The strength of habit persistence seems to be weaker for households with several adults and children compared to one-adult-households.

Keywords: consumer choice; habit persistence; food consumption; preference heterogeneity

JEL-codes: C35; D12

31 pages, July 7, 2008

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