| Summary: | In this paper, I find that consumers exhibit, on average, negative flavor state dependence in the market for Minute Maid and Tropicana chilled punch. In contrast, past research usually finds positive state dependence in consumers' choices. If negative state dependence were interpreted as consumer variety seeking, intuition would suggest that firms should supply more products when consumers exhibit such behavior. Through a supply side model calibrated to data from the chilled punch market, I find that consumer negative state dependence does increase a firm's incentive to supply more products; but, this is mostly through business stealing. Without business stealing, negative state dependence would have a much smaller effect on the number of products offered by a firm and could even decrease it. For example, if the retailer is maximizing the category's store profits, negative state dependence decreases the likelihood that the retailer offers Tropicana's tropical punch; but, if the retailer gave autonomy to the brands and allowed them to compete for store profits, negative state dependence would increase that likelihood.
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