Measuring the implications of sales and consumer inventory behavior
By: Igal Hendel, Aviv Nevo.
Contributors: Nevo, Aviv.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11307; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11307.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Special sales -- Economic aspects; Consumer behavior -- Mathematical models
Description: "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 mis-measure 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 to other products by up to a factor of 5; and (iii) overestimate the substitution to the no purchase, or outside option, by over 200 percent"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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