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Demand Estimation Under Incomplete Product Availability

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  • Christopher T. Conlon
  • Julie Holland Mortimer

Abstract

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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14315.

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Date of creation: Sep 2008
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Publication status: published as Christopher T. Conlon & Julie Holland Mortimer, 2013. "Demand Estimation under Incomplete Product Availability," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 1-30, November.
Handle: RePEc:nbr:nberwo:14315

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Cited by:
  1. Katherine Ho & Justin Ho & Julie Holland Mortimer, 2012. "The Use of Full-Line Forcing Contracts in the Video Rental Industry," American Economic Review, American Economic Association, American Economic Association, vol. 102(2), pages 686-719, April.
  2. Sergei Koulayev, 2009. "Estimating demand in search markets: the case of online hotel bookings," Working Papers, Federal Reserve Bank of Boston 09-16, Federal Reserve Bank of Boston.
  3. Christopher T. Conlon & Julie Holland Mortimer, 2010. "Effects of Product Availability: Experimental Evidence," Boston College Working Papers in Economics, Boston College Department of Economics 798, Boston College Department of Economics.
  4. Brian Jacob & Brian McCall & Kevin M. Stange, 2013. "College as Country Club: Do Colleges Cater to Students’ Preferences for Consumption?," NBER Working Papers 18745, National Bureau of Economic Research, Inc.
  5. Christopher T. Conlon & Julie Holland Mortimer, 2013. "Demand Estimation under Incomplete Product Availability," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 5(4), pages 1-30, November.
  6. Phillip Leslie & Alan Sorensen, 2009. "The Welfare Effects of Ticket Resale," NBER Working Papers 15476, National Bureau of Economic Research, Inc.
  7. K. Sudhir & Nathan Yang, 2014. "Exploiting the Choice-Consumption Mismatch: A New Approach to Disentangle State Dependence and Heterogeneity," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1941, Cowles Foundation for Research in Economics, Yale University.
  8. Steven Berry & Panle Jia, 2008. "Tracing the Woes: An Empirical Analysis of the Airline Industry," NBER Working Papers 14503, National Bureau of Economic Research, Inc.
  9. Yael Steinhart & David Mazursky & Michael Kamins, 2013. "The process by which product availability triggers purchase," Marketing Letters, Springer, Springer, vol. 24(3), pages 217-228, September.
  10. Sergei Koulayev, 2008. "Estimating search with learning," Working Papers, NET Institute 08-29, NET Institute, revised Oct 2008.
  11. Draganska, Michaela & Klapper, Daniel, 2010. "Choice Set Heterogeneity and the Role of Advertising: An Analysis with Micro and Macro Data," Research Papers, Stanford University, Graduate School of Business 2063, Stanford University, Graduate School of Business.
  12. Friberg, Richard & Paterson, Robert W & Richardson, Andrew D, 2010. "Why is there a home bias? A case study of Wine," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7885, C.E.P.R. Discussion Papers.

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