Price Search Across Time and Across Stores

Navid Mojir and K. Sudhir (k.sudhir@yale.edu)
Additional contact information
Navid Mojir: Harvard Business School
K. Sudhir: Yale School of Management and Cowles Foundation

No 1942R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: In response to price dispersion across stores and price promotions over time, consumers search across both stores and time, in many retail settings. Yet there is no search model in extant research that jointly endogenizes search in both dimensions. We develop a model of search across stores and across time that nests a nite horizon model of search across stores within an in nite horizon model of inter-temporal search. The model is estimated using an iterative procedure that formulates it as a mathematical program with equilibrium constraints (MPEC) embedded within an E-M algorithm to allow estimation of latent class heterogeneity. The empirical analysis uses data on household store visits and purchases in the milk category. In contrast to extant research, we nd that omitting the temporal dimension underestimates price elasticity. We attribute this di"erence to the relative frequency of household stockouts and purchase frequency in the milk category. Interestingly, we nd that for a given mean and variance in price, increasing the frequency while reducing depth of price promotions across all stores can increase share of visits and pro ts for consumers� preferred store for the segment with high price sensitivity and low cross-store search cost; consumers who are most prone to search across stores and across time.

Keywords: Consumer Search; Price Search; Store search; Spatial search; Temporal search; Spatiotemporal Search; Dynamic Structural Models; MPEC (search for similar items in EconPapers)
JEL-codes: D12 L81 M31 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2014-03, Revised 2019-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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