Title: Measuring the implications of sales and consumer inventory behavior
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.
Subjects: Consumer behavior, Economic aspects, Economic aspects of Special sales, Mathematical models, Special sales