Measuring the Implications of Sales and Consumer Inventory Behavior by Igal Hendel
نویسندگان
چکیده
Temporary price reductions (sales) are common for many goods and naturally result in large increases in the quantity sold. Demand estimation based on temporary price reductions may mismeasure the long-run responsiveness to prices. In this paper we quantify the extent of the problem and assess its economic implications. We structurally estimate a dynamic model of consumer choice using two years of scanner data on the purchasing behavior of a panel of households. The results suggest that static demand estimates, which neglect dynamics, (i) overestimate own-price elasticities by 30 percent, (ii) underestimate cross-price elasticities by up to a factor of 5, and (iii) overestimate the substitution to the no-purchase or outside option by over 200 percent. This suggests that policy analysis based on static elasticity estimates will underestimate price–cost margins and underpredict the effects of mergers.
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Measuring the Implications of Sales and Consumer Stockpiling Behavior
Temporary price reductions (sales) are common for many goods and naturally result in large increase in the quantity sold. In previous work we found that the data support the hypothesis that these increases are, at least partly, due to dynamic consumer behavior: at low prices consumers stockpile for future consumption. In this paper we quantify the magnitude of the effect and derive the quantita...
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spring 2001 NBER Productivity workshop, Berkeley, BYU, Chicago GSB, Northwestern, Wharton, University of Virginia and University of Wisconsin for comments and suggestions. The second author wishes to thank the Center for the Study of Industrial Organization at Northwestern University, for hospitality and support. Comments are very welcome and should be directed to either [email protected] or ne...
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