NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measuring the Implications of Sales and Consumer Inventory Behavior

Igal Hendel, Aviv Nevo

NBER Working Paper No. 11307
Issued in May 2005
NBER Program(s):   IO

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.

download in pdf format
   (751 K)

email paper

This paper is available as PDF (751 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11307

Published: Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.

Users who downloaded this paper also downloaded these:
Hendel and Nevo w9048 Sales and Consumer Inventory
Nevo w16511 Empirical Models of Consumer Behavior
Gowrisankaran and Rysman w14737 Dynamics of Consumer Demand for New Durable Goods
Nevo t0221 A Research Assistant's Guide to Random Coefficients Discrete Choice Models of Demand
Ashenfelter and Hosken w13859 The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us