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Demand Estimation Under Incomplete Product Availability

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  • Christopher T. Conlon

    () (Department of Economics, Columbia University)

  • Julie Holland Mortimer

    () (Boston College)

Abstract

Incomplete product availability is an important feature of many markets, and ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system on vending machines to track product availability every four hours. The data allow us to account for product availability when estimating demand, and provide valuable variation for identifying substitution patterns when products stock out. We develop a procedure that allows for changes in product availability when availability is only observed periodically. We find significant differences in demand estimates: the corrected model predicts significantly larger impacts of stock-outs on profitability.

Suggested Citation

  • Christopher T. Conlon & Julie Holland Mortimer, 2010. "Demand Estimation Under Incomplete Product Availability," Boston College Working Papers in Economics 799, Boston College Department of Economics, revised 07 Aug 2012.
  • Handle: RePEc:boc:bocoec:799
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    JEL classification:

    • L0 - Industrial Organization - - General

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