COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1856 Short Run Needs and Long Term Goals: Guofang Huang, Ahmed Khwaja and K. Sudhir March 2012 Beverage consumption occurs many times a day in response to a variety
of needs that change throughout the day. In making their choices, consumers self-regulate
their consumption by managing short run needs (e.g., hydration and mood pickup) with
long-term goals (e.g., health). Using unique intra-day beverage consumption, activity and
psychological needs data, we develop and estimate a model of high frequency consumption
choices that accounts for both intra-day changes in short run needs and individual level
unobserved heterogeneity in the degree of self-regulation. A novel feature of the model is
that it allows for dynamics of consumption and stockpiling at the level of product
attributes. The model is used to evaluate introduction of new products in the beverage
category and gain insight into the linkage between self-regulation and excess consumption.
Broadly, the modeling framework of balancing short run needs with long-term goals has wide
ranging applications in choices where long term effects are gradual (e.g., nutrition,
exercise, smoking and preventive health care). |
