Essays on the Estimation of Demand for Complementary Goods

This dissertation investigates the problem of demand estimation across complementary goods at the level of individual purchase decisions made by consumers. At this micro level, package sizes may restrict the amount of goods that can be purchased, and temporary price discounts may induce consumers to stockpile goods in anticipation of their future consumption needs, leading to dynamics in purchasing behavior over time. We address these issues in two essays by proposing new structural models of demand. In the first essay, we develop a new approach to modeling consumer preferences for complements which is based on household production theory, and we study the importance of accounting for package size restrictions in modeling cross-category price effects. In the second essay, we embed this approach in a model of consumer forward-looking behavior to study the consequences of stockpiling behavior on the spillover effect of prices across complementary products that are storable.