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Demand Estimation Under Incomplete Product Availability

  • Christopher T. Conlon

    ()

    (Department of Economics, Columbia University)

  • Julie Holland Mortimer

    ()

    (Boston College)

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.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 799.

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Date of creation: 03 May 2010
Date of revision: 07 Aug 2012
Publication status: published in American Economic Journal: Microeconomics, 5:4, 1-3
Handle: RePEc:boc:bocoec:799
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