Dynamic Brand Satiation

Abstract

The authors develop a dynamic factor model of brand satiation to explain longitudinal variation in consumer purchases. Factor loadings are associated with a brand's position along a satiation dimension, and factor scores are associated with a household's sensitivity to satiation effects. The authors introduce dynamics by allowing the factor scores to evolve over time, reflecting variation in household satiation sensitivity. They embed the factor model in a direct utility model that allows for both corner and interior solutions and show that it fits the data better than alternative specifications. Analysis of a panel data set of corn chips purchases indicates that respondent satiation is better explained by a low-dimensional factor structure, while baseline utility and preferences are not. The authors explore implications for product line assortment in the face of quickening satiation.