The Evolution of Brand Preferences: Evidence from Consumer Migration
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.
We thank Aimee Drolet, Jon Guryan, Emir Kamenica, Kevin Murphy, Fiona Scott Morton, Jesse Shapiro, Chad Syverson, 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 Frankfurt, 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 Hyatt 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. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Bronnenberg, Bart J., Jean-Pierre H. Dubé, and Matthew Gentzkow. 2012. "The Evolution of Brand Preferences: Evidence from Consumer Migration." American Economic Review, 102(6): 2472-2508. citation courtesy of