TY  - JOUR
AU  - Hendel,Igal
AU  - Nevo,Aviv
TI  - Sales and Consumer Inventory
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9048
PY  - 2002
Y2  - July 2002
UR  - http://www.nber.org/papers/w9048
L1  - http://www.nber.org/papers/w9048.pdf
N1  - Author contact info:
Igal Hendel
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8226
Fax: 847/491-7001
E-Mail: igal@northwestern.edu

Aviv Nevo
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208-2600
Tel: 847/491-8212
Fax: 847/491-7001
E-Mail: nevo@northwestern.edu
AB  - 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.
ER  -