The Evolution of Brand Preferences Evidence from Consumer Migration
The Evolution of Brand Preferences Evidence from Consumer Migration Bart J. Bronnenberg Jean-Pierre H. Dubé CentER, Tilburg University University of Chicago and NBER Matthew Gentzkow∗ University of Chicago and NBER First version: April 26, 2010 This version: August 2, 2010 Abstract We study the long-run evolution of brand preferences, using new data on consumers’ life histo- ries 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 con- temporaneous supply-side factors. We show that brand preferences form endogenously, are highly persistent, and explain 40 percent of geographic variation in market shares. Counterfactuals suggest that brand preferences create large entry barriers and durable advantages for incumbent firms, and can explain the persistence of early-mover advantage over long periods. JEL classification: D12, L1 ∗We thank Aimee Drolet, Jon Guryan, Emir Kamenica, Kevin Murphy, Fiona Scott Morton, Jesse Shapiro, Chad Syver- son, and participants at the INFORMS Marketing Science Conference, in Ann Arbor, Michigan, the 2nd Workshop on the Economics of Advertising and Marketing in Paris, France, and the NBER Summer Institute (IO) for helpful comments. We gratefully acknowledge feedback from seminar participants at the Erasmus University Rotterdam, Goethe University Frank- furt, Hong Kong University of Science and Technology, London Business School, Stanford University, Tel-Aviv University, University of California, Los Angeles, the University of Chicago, and Universidade Nova Lissabon. We thank Grace Hy- att and Todd Kaiser at Nielsen for their assistance with the collection of the data, and the Marketing Science Institute, the Neubauer Family Foundation, and the Initiative on Global Markets at the University of Chicago Booth School of Business for financial support.
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