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Sales and Consumer Inventory

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  • Hendel, Igal
  • Nevo, Aviv

Abstract

Temporary price reductions (sales) are quite common for many goods and usually result in an increase in the quantity sold. We explore whether the data support the hypothesis that these increases are, at least partly, due to dynamic consumer behavior: at low prices consumers stockpile for future consumption. This effect, if present, has broad implications for interpretation of demand estimates. We construct a dynamic model of consumer choice and use it to derive testable predictions. We test the implications of the model using two years of store-level scanner data and data on the purchases of a panel of households over the same time. The results support the existence of household stockpiling behavior.

Suggested Citation

  • Hendel, Igal & Nevo, Aviv, 2001. "Sales and Consumer Inventory," Department of Economics, Working Paper Series qt11x3d68b, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt11x3d68b
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    References listed on IDEAS

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    1. Robert C. Blattberg & Richard Briesch & Edward J. Fox, 1995. "How Promotions Work," Marketing Science, INFORMS, vol. 14(3_supplem), pages 122-132.
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    5. David R. Bell & Jeongwen Chiang & V. Padmanabhan, 1999. "The Decomposition of Promotional Response: An Empirical Generalization," Marketing Science, INFORMS, vol. 18(4), pages 504-526.
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    Cited by:

    1. Tülin Erdem & Susumu Imai & Michael Keane, 2003. "Brand and Quantity Choice Dynamics Under Price Uncertainty," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 5-64, March.
    2. Junmin Wan, 2004. "Rational Addiction with Optimal Inventories: Theory and Evidence from Cigarette Purchases in Japan," Discussion Papers in Economics and Business 04-01-Rev, Osaka University, Graduate School of Economics, revised Feb 2006.
    3. Nathan Marwell & Leslie McGranahan, 2010. "The effect of sales tax holidays on household consumption patterns," Working Paper Series WP-2010-06, Federal Reserve Bank of Chicago.

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    More about this item

    Keywords

    consumer choice; stockpile;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L - Industrial Organization

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