Marketing researchers and practitioners are interested in consumer loyalty because of its managerial consequences. Previous empirical studies find that consumers are loyal not only to a brand, but also to a firm (umbrella brand). That is, even when firms offer new products, consumers tend to continue to purchase from the same firm.This repeat-purchase behavior might result from state dependence or from heterogeneity. The meaning of state dependence is that the current choice behaviorally depends on the previous one. The traditional model of state dependence assumes that the previous choice affects the current utility. This study suggests another source of state dependence: The previous choice affects the current information set. Specifically, the model assumes that the consumer (a) knows the attributes of the new product offered by the firm from which he/she purchased in the previous period, (b) is uncertain about the attributes of the new products offered by the other firms, (c) can obtain full information about the attributes of all the products through a costly search, and (d) if the consumer decides not to search, he/ she purchases the new product offered by the firm from which he/she purchases in the previous period.It is shown that state dependence can result either from the effect of previous choices on the current utility or from its effect on the current information set. This theoretical result raises the following question: What kind of data does a researcher need in order to distinguish between the two sources of state dependence? This study shows that the two sources can be distinguished with a standard panel data set. In other words, although the new source of state dependence is based on the search activity of consumers, there is an identifying factor that enables a researcher to detect such activity even without direct data on search. The empirical distinction is possible because the behavioral implications of the two sources of state dependence are different. They differ in the effect of product attributes on the repeat-purchase probability.The following example partially illustrates this result: There are two firms A and B; the consumer purchased a product from firm A in period t 2 1; the only product attribute is x; and the utility is a linear function of x. One aspect of our findings is that in the traditional model of state dependence a change in both x A and x B that leaves the difference between them, (x A 2 x B ), unchanged (neutral change, hereinafter) has no effect on the repeat-purchase probability. However, such a change does affect the repeat-purchase probability in the asymmetric information model of state dependence. This is only one aspect of the finding-the implications of the models differ in a more general fashion.The intuition of this result is the following. A neutral change has no effect on the repeat-purchase probability in the traditional model of state dependence, because it does not affect the difference between the utilities from both alternatives. In the asymmet...