Preference heterogeneity and habit persistence: The case of breakfast cereal consumption

Abstract

The efficiency of information, price campaigns and economic incentive policies related to food depend on the degree of habit persistence in food consumption. This paper estimates the strength of state dependence associated with breakfast cereal consumption and its heterogeneity across households, where positive state dependence implies habit persistence and negative state dependence implies variety seeking in consumption. The analysis uses a detailed micro-level dataset from the research institute GfK Sweden on household breakfast cereal consumption in 2003. The analysis relies on a mixed multinomial logit model and finds breakfast cereal consumption is generally highly habitual. The degree of habit persistence, however, exhibits heterogeneity across households. In addition, some households can be characterised as variety seeking. The strength of habit persistence is similar across income and educational groups. The strength of habit persistence seems to be weaker for households with several adults and children compared with one-adult households. © 2010 The Author. Journal compilation © 2010 The Agricultural Economics Society.