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Biases in demand analysis due to variation in retail distribution

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  • Tenn, Steven
  • Yun, John M.
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    Abstract

    Aggregate demand models typically assume that consumers choose between all available products. Since consumers may be unwilling to search across every store in a given market for a particular item, this assumption is problematic when product assortments vary across stores. Using supermarket scanner data for five product categories we demonstrate that approximately one third of products have limited retail distribution, which account for one fourth of dollar sales. Monte Carlo analysis demonstrates that the level of limited product availability observed in the data can significantly bias the results of aggregate demand models that incorrectly assume all consumers in a given market face the same choice set.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 26 (2008)
    Issue (Month): 4 (July)
    Pages: 984-997

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    Handle: RePEc:eee:indorg:v:26:y:2008:i:4:p:984-997

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    Web page: http://www.elsevier.com/locate/inca/505551

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    Cited by:
    1. I. Haller & H. Grupp, 2009. "Demand by product characteristics: measuring solar cell quality over time," Journal of Evolutionary Economics, Springer, vol. 19(4), pages 487-506, August.

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