The demand for food products
Abstract
In this paper we study household purchase behaviour of storable food products. An inventoly
model is developed in which the household chooses an optimal stock level of the product.
Storage of the product is costly, there is a fixed cost per purchase occasion, and the market
price is sometimes discounted because of price promotions. We show that the optimal
purchase policy is an s, S policy. The model is used to derive predictions on the correlations
between interpurchase times and purchased quantities on the one hand, and prices on the
other. These predictions are empirically verified using consumer panel data.