Learned Complementarity
Working paper.
Abstract
Product substitution patterns are often treated as static. This paper studies dynamic complementarity in DIY home improvement purchases, documents that co-purchase likelihood rises with category experience, and estimates a model in which consumers sequentially realize super-additive utility from co-consumption over time. The estimates reveal substantial heterogeneity in substitution patterns within and across households, and the economic value of moving one step on the path of learned complementarity is roughly $1, about 5% of the average purchase price in the data.
Main Finding
Complementarity rises with category experience, and moving one step along the learned-complementarity path is worth roughly $1, about 5% of the average purchase price.