UCLA

Across a wide variety of contexts, people who have experienced an event are more likely toexperience that event in the future. This empirical regularity, hereafter referred to as state dependence, has two explanations, each with its own set of policy and managerial implications. One explanation, known as structural state dependence, is that the experience of an event alters the preferences or constraints that an individual would hold for that event in the future. A second explanation, spurious state dependence, is that people differ along some unobservable propensity to experience an event. For example, people that become unemployed once are more likely to be unemployed in the future. The structural explanation for this phenomenon is that unemployment has a sustained effect on the probability of future unemployment, while the spurious explanation argues that individuals vary on some unobservable variable, such as work ethic or skill set, that affects their probability of becoming unemployed at any time. These explanations have different implications: if state dependence is structural, short-term policies reducing unemployment can have large long-run effects. This dissertation aims to explore the effects of structural state dependence in three contexts: brand choice, store choice, and category consumption.

Using techniques in causal inference and structural modelling, and a rich database of transactiondata, I find that structural state dependence 1) has no effect on brand choice in consumer packaged goods, 2) has a strong effect on where people shop for groceries, impacting nutritional intake, and 3) drives consumption in addictive categories to varying extents. These findings give us a better understanding of why brand choice persists over time, why nutritional intake varies drastically across demographic groups, and how cigarette types vary in their addictive and habit-forming properties.