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State dependence June 8, 2007

Posted by jyu in Qualifying.

Choice made in previous periods might causally affect a consumer’s current utility or habit persistence in which there is over time dependence of the random component of utility consumers derive from products.

Structural approach have attempted to explain the behavioral source of state dependence as learning, inertia or variety seeking, or switching costs.

Reference price effects might be observed if consumers have forward-looking expectations about future prices and promotions and might alter their purchase timing, brand choice, and quantity decision accordingly.



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