1. Essays on Consumer Purchase Behavior and Competitive Firm Strategies
- Author
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Chen, Andy Wei-Rong and Chen, Andy Wei-Rong
- Abstract
The two essays explore two topics in marketing - consumer purchase behavior and competitive firm strategies. The first essay examines consumer stockpiling behavior in the retail gasoline market and aims to shed light on what factors affect consumer stockpiling. Past research on consumer stockpiling behavior such as Hendel and Nevo (2006) finds evidence of inter-temporal substitution by consumers that implies stockpiling behavior. However, they do not observe actual inventory or consumption and have to rely on simplifying assumptions about these quantities. I collect a novel data set of gasoline purchase history of consumers with actual inventory and consumption to test several hypotheses that relate consumer stockpiling to price, duration between purchases, and consumption. First, I find that consumers holding more inventory are more price sensitive. Higher inventory increases the impact of price on purchase decisions and those with higher inventory can afford to do more price search before making a purchase. I also find that all else equal, consumers will reduce consumption following a purchase made during high prices; that consumers with lower inventory have a higher probability of purchasing; and that duration from previous purchase is shorter for purchases made during low prices and longer during high prices. The second essay examines competition in a dynamic setting between Wal-Mart and Target in the context of location choices and expansion strategies. Studying this topic sheds light on how an industry evolves and how the market structure is shaped by decisions such as when to enter and exit and where to locate new stores as well as the driving force behind different expansion strategies. One of the early papers by Bresnahan and Reiss (1991) study entry of retail and professional services into isolated markets in a one-shot game. In their model, firms are allowed to enter once and open one store. Collard-Wexler (2014) estimates a model of investment and entry
- Published
- 2016