Measuring Heterogeneity of Habitualness in Consumer Behavior

Habits are key determinants of consumer behavior across a range of domains, such as food consumption, brand selection, transportation choice, technology usage, and health-related behaviors. Habits may also affect consumer responses to exogenous shocks, including changes in policies targeted at consumers. Adequately defining and measuring habits is therefore important for both understanding and predicting consumer behavior. In this paper, we develop a habit index that is based on regularity of observed purchases. Our index is suitable for comparing habitualness across product groups and types of households. We estimate the index using Danish home-scan food purchase data and find that across product groups, habitualness is higher for breakfast foods and products with short shelf lives. Across households, habitualness decreases with household income and is higher for households whose main shopper is male. We also examine how habitualness affects price sensitivity and responsiveness to Danish fat and sugar taxes. We find that habitual consumers are less sensitive to general price fluctuations, but more responsive to tax changes.