An empirical test of the Theory of Sales: Do household storage constraints affect consumer and store behavior?

David Bell () and Christian Hilber

Quantitative Marketing and Economics (QME), 2006, vol. 4, issue 2, 87-117

Abstract: We revisit and test Salop and Stiglitz (1982) Theory of Sales. Equilibrium comparative static predictions are that greater consumer storage constraints lead to: (1) higher average prices, (2) fewer promotions, and (3) shallower promotions. In equilibrium, price dispersion is nonlinear in storage constraints, first increasing then decreasing. Empirical estimates of storage constraints are developed for approximately 1,000 households using the American Housing Survey (1989), United States Census (1990), and Stanford Market Basket Database (1991–1993). We find consumers with greater storage constraints shop more often and purchase smaller quantities per visit; moreover, the comparative static predictions are supported and evidence consistent with the equilibrium dispersion prediction is observed. Estimated quantitative effects are economically important. Copyright Springer Science + Business Media, LLC 2006

Keywords: Consumer behavior; Housing constraints; Price promotion; Retail prices; Storage (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11129-006-8127-9 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:qmktec:v:4:y:2006:i:2:p:87-117

Ordering information: This journal article can be ordered from
http://www.springer. ... ng/journal/11129/PS2

DOI: 10.1007/s11129-006-8127-9

Access Statistics for this article

Quantitative Marketing and Economics (QME) is currently edited by Pradeep Chintagunta

More articles in Quantitative Marketing and Economics (QME) from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().