The Evolution of Brand Preferences: Evidence from Consumer Migration / Bart J. Bronnenberg, Jean-Pierre H. Dube, Matthew Gentzkow.

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Bronnenberg, Bart J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w16267.Publication details: Cambridge, Mass. National Bureau of Economic Research 2010.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study the long-run evolution of brand preferences, using new data on consumers' life histories and purchases of consumer packaged goods. Variation in where consumers have lived in the past allows us to isolate the causal effect of past experiences on current purchases, holding constant contemporaneous supply-side factors such as availability, prices, and advertising. Heterogeneity in brand preferences explains 40 percent of geographic variation in market shares. These preferences develop endogenously as a function of consumers' life histories and are highly persistent once formed, with experiences 50 years in the past still exerting a significant effect on current consumption. Counterfactuals suggest that brand preferences create large entry barriers and durable advantages for incumbent firms, and can explain persistence of early-mover advantage over long periods. Variation across product categories shows that the persistence of brand preferences is related in an intuitive way to both advertising levels and the social visibility of consumption.

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Working Paper	Biblioteca Digital	Colección NBER	nber w16267 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w16264 Globalization, the Business Cycle, and Macroeconomic Monitoring /	nber w16265 The Establishment-Level Behavior of Vacancies and Hiring /	nber w16266 Immigration: America's nineteenth century "law and order problem"? /	nber w16267 The Evolution of Brand Preferences: Evidence from Consumer Migration /	nber w16268 Taxes, Permits, and Climate Change /	nber w16269 International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons /	nber w1627 A Tax-Based Test for Nominal Rigidities /	Next

August 2010.

We study the long-run evolution of brand preferences, using new data on consumers' life histories and purchases of consumer packaged goods. Variation in where consumers have lived in the past allows us to isolate the causal effect of past experiences on current purchases, holding constant contemporaneous supply-side factors such as availability, prices, and advertising. Heterogeneity in brand preferences explains 40 percent of geographic variation in market shares. These preferences develop endogenously as a function of consumers' life histories and are highly persistent once formed, with experiences 50 years in the past still exerting a significant effect on current consumption. Counterfactuals suggest that brand preferences create large entry barriers and durable advantages for incumbent firms, and can explain persistence of early-mover advantage over long periods. Variation across product categories shows that the persistence of brand preferences is related in an intuitive way to both advertising levels and the social visibility of consumption.