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Brand and Quantity Choice Dynamics Under Price Uncertainty

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Author Info

  • Tülin Erdem

    ()

  • Susumu Imai

    ()

  • Michael Keane

    ()

Abstract

We develop a model of household demand for frequently purchased consumer goods that are branded, storable and subject to stochastic price fluctuations. Our framework accounts for how inventories and expectations of future prices affect current period purchase decisions. We estimate our model using scanner data for the ketchup category. Our results indicate that price expectations and the nature of the price process have important effects on demand elasticities. Long-run cross price elasticities of demand are more than twice as great as short-run cross price elasticities. Temporary price cuts (or “deals”) primarily generate purchase acceleration and category expansion, rather than brand switching. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1023536326497
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Bibliographic Info

Article provided by Springer in its journal Quantitative Marketing and Economics.

Volume (Year): 1 (2003)
Issue (Month): 1 (March)
Pages: 5-64

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Handle: RePEc:kap:qmktec:v:1:y:2003:i:1:p:5-64

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Web page: http://www.springerlink.com/link.asp?id=111240

Related research

Keywords: price expectations; pricing; scanner data; dynamic programming; simulation; discrete choice; stock piling; inventories;

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