| Using fluid milk as a case study, this dissertation focuses on purchase behavior associated with two related consumer choices: choosing organic or non-organic milk, and choosing private label (store brand) or national brand milk. Milk serves as an excellent sector for a case study because organic milk sales are growing at increasing rates, non-organic private-label milk composes a large share of the market, and organic private-label milk is becoming more widely offered by U.S. supermarkets.;Essay I constructs four price series for the organic and non-organic private label and branded milk categories, and estimates a 3SLS system to see how these four prices react to each other. For non-organic milk, we find that the PL price and the branded price are positively related, a result that is generally consistent with other research. This type of price reaction can be labeled as cooperative and symmetric. One the other hand, for organic milk, the national brand price and PL price react to each other differently. The price of organic PL milk increases with an increase of organic national brand milk price, while instead the organic national brand milk decreases price with a price increase of organic PL milk. This price reaction falls into the asymmetric dominant-fringe price competition, and fits the reality that organic national brand's market share is currently dominant in organic milk.;Essay II estimates factors that influence consumers' hazard for first organic milk purchase. A discrete time hazard model reveals that demographic variables, such as age, education, and household size affect the time of first organic milk purchase. Another finding is that the organic milk price affects an organic milk purchase significantly, while the non-organic milk price does not. Comparing the models with and without frailty, we conclude that neglecting unobserved heterogeneity underestimates the coefficients.;Essay III uses an estimation of a two-stage decision model where customers are assumed to first decide whether to buy organic or non-organic milk, and then, conditional on that decision, decide whether to buy a store's private label brand or a national brand. Results show that the effect of shopping patterns, coupon redemptions, and other marketing factors affect households' private label choice in a similar fashion, no matter organic or non-organic milk is first selected. However, demographic factors depend on 1st stage selection. Age and education significantly influence the private label choice for households who select organic but not for those who select non-organic, while income and household size only significantly influence non-organic buyers. |
