Brand and Quantity Choice Dynamics Under Price Uncertainty
AbstractWe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 52516.
Date of creation: 2003
Date of revision:
price expectations; pricing; scanner data; dynamic programming; simulation; discrete choice; stock piling; inventories;
Other versions of this item:
- Tülin Erdem & Susumu Imai & Michael Keane, 2003. "Brand and Quantity Choice Dynamics Under Price Uncertainty," Quantitative Marketing and Economics, Springer, vol. 1(1), pages 5-64, March.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D1 - Microeconomics - - Household Behavior
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising
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