Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If You Use a Screen Reader

This content is available through Read Online (Free) program, which relies on page scans. Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.

Measuring the Implications of Sales and Consumer Inventory Behavior

Igal Hendel and Aviv Nevo
Econometrica
Vol. 74, No. 6 (Nov., 2006), pp. 1637-1673
Published by: The Econometric Society
Stable URL: http://www.jstor.org/stable/4123086
Page Count: 37
  • Read Online (Free)
  • Download ($10.00)
  • Subscribe ($19.50)
  • Cite this Item
Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Measuring the Implications of Sales and Consumer Inventory Behavior
Preview not available

Abstract

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.

Page Thumbnails

  • Thumbnail: Page 
1637
    1637
  • Thumbnail: Page 
1638
    1638
  • Thumbnail: Page 
1639
    1639
  • Thumbnail: Page 
1640
    1640
  • Thumbnail: Page 
1641
    1641
  • Thumbnail: Page 
1642
    1642
  • Thumbnail: Page 
1643
    1643
  • Thumbnail: Page 
1644
    1644
  • Thumbnail: Page 
1645
    1645
  • Thumbnail: Page 
1646
    1646
  • Thumbnail: Page 
1647
    1647
  • Thumbnail: Page 
1648
    1648
  • Thumbnail: Page 
1649
    1649
  • Thumbnail: Page 
1650
    1650
  • Thumbnail: Page 
1651
    1651
  • Thumbnail: Page 
1652
    1652
  • Thumbnail: Page 
1653
    1653
  • Thumbnail: Page 
1654
    1654
  • Thumbnail: Page 
1655
    1655
  • Thumbnail: Page 
1656
    1656
  • Thumbnail: Page 
1657
    1657
  • Thumbnail: Page 
1658
    1658
  • Thumbnail: Page 
1659
    1659
  • Thumbnail: Page 
1660
    1660
  • Thumbnail: Page 
1661
    1661
  • Thumbnail: Page 
1662
    1662
  • Thumbnail: Page 
1663
    1663
  • Thumbnail: Page 
1664
    1664
  • Thumbnail: Page 
1665
    1665
  • Thumbnail: Page 
1666
    1666
  • Thumbnail: Page 
1667
    1667
  • Thumbnail: Page 
1668
    1668
  • Thumbnail: Page 
1669
    1669
  • Thumbnail: Page 
1670
    1670
  • Thumbnail: Page 
1671
    1671
  • Thumbnail: Page 
1672
    1672
  • Thumbnail: Page 
1673
    1673