Demand Estimation Under Incomplete Product Availability
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NBER Working Paper No. 14315
Issued in September 2008
NBER Program(s): IO
Incomplete product availability is an important feature of many markets; ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system installed on 54 vending machines to track product availability every four hours. The data allow us to account for product availability when estimating demand, and provides a valuable source of variation for identifying substitution patterns. We develop a procedure that allows for changes in product availability even when availability is only observed periodically. We find significant differences in demand estimates, with the corrected model predicting significantly larger impacts of stock-outs on profitability.
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This paper was revised on December 5, 2011 Acknowledgments
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