Habits in frequency of purchase models: the case of fish in France

Abstract

The quantity purchased in a period is the result of two decisions: the frequency of purchase and the average purchase on each occasion. We introduce habit formation into demand systems modelling each of these decisions. An econometric model is estimated by Bayesian methods. The data generating processes of the frequency and quantity decisions are assumed to follow, respectively, a multivariate Poisson log-normal distribution and a multivariate gamma log-normal distribution. We estimate the systems using French scanner data for purchases of fish. The results suggest that habits in purchase frequencies are important, while habits in average purchased quantities are less important. Furthermore, we find that price changes are important for explaining average quantities purchased but have only minor effects on purchase frequencies.