Sales and Consumer Inventory

Igal Hendel and Aviv Nevo

No 9048, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Temporary price reductions (sales) are common for many goods and naturally result in large increase in the quantity sold. We explore whether the data support the hypothesis that these increases are, at least partly, due to dynamic consumer behavior: at low prices consumers stockpile for future consumption. This effect, if present, renders standard static demand estimates misleading, which has broad economic implications. We construct a dynamic model of consumer choice, use it to derive testable predictions and test these predictions using two years of scanner data on the purchasing behavior of a panel of households. The results support the existence of household stockpiling behavior and suggest that static demand estimates, which neglect dynamics, may overestimate price sensitiveness by up to a factor of 2 to 6.

JEL-codes: L0 L4 (search for similar items in EconPapers)
Date: 2002-07
Note: IO PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Igal Hendel & Aviv Nevo, 2006. "Sales and Consumer Inventory," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 543-561, Autumn.

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Related works:
Journal Article: Sales and consumer inventory (2006)
Working Paper: Sales and Consumer Inventory (2001)
Working Paper: Sales and Consumer Inventory (2001)
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