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Effects of Product Availability: Experimental Evidence

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  • Christopher T. Conlon
  • Julie Holland Mortimer

Abstract

Product availability impacts many industries such as transportation, events, and retail, yet little empirical evidence documents the importance of stocking decisions for firm profits, vertical relationships, or consumers. We conduct several experiments, exogenously removing top-selling products from a set of vending machines and analyzing substitution patterns and profit impacts of the changed product availability using nonparametric analyses and structural demand estimation. We find substantial switching to alternate products, and evidence of misaligned incentives between upstream and downstream firms in the choice of which products to carry. We discuss the trade-offs of both empirical approaches for analyzing product availability effects generally.

Suggested Citation

  • Christopher T. Conlon & Julie Holland Mortimer, 2010. "Effects of Product Availability: Experimental Evidence," NBER Working Papers 16506, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16506
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    References listed on IDEAS

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    1. Victor Aguirregabiria, 1999. "The Dynamics of Markups and Inventories in Retailing Firms," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 275-308.
    2. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    3. Fitzsimons, Gavan J, 2000. " Consumer Response to Stockouts," Journal of Consumer Research, Oxford University Press, vol. 27(2), pages 249-266, September.
    4. Ostrovsky, Michael & Schwarz, Michael, 2009. "Reserve Prices in Internet Advertising Auctions: A Field Experiment," Research Papers 2054, Stanford University, Graduate School of Business.
    5. Dean Karlan & John A. List, 2007. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," American Economic Review, American Economic Association, vol. 97(5), pages 1774-1793, December.
    6. 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.
    7. J. Levin & L. Einav., 2012. "Empirical Industrial Organization: A Progress Report," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    8. Michael P. Keane, 2010. "A Structural Perspective on the Experimentalist School," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 47-58, Spring.
    9. Patrick Bajari & Jeremy T. Fox & Kyoo il Kim & Stephen P. Ryan, 2009. "A Simple Nonparametric Estimator for the Distribution of Random Coefficients," NBER Working Papers 15210, National Bureau of Economic Research, Inc.
    10. repec:feb:artefa:0090 is not listed on IDEAS
    11. Richard Engelbrecht-Wiggans & John A. List & David H. Reiley, 2005. "Demand Reduction in Multi-Unit Auctions: Evidence from a Sportscard Field Experiment: Reply," American Economic Review, American Economic Association, vol. 95(1), pages 472-476, March.
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    Cited by:

    1. repec:spr:annopr:v:240:y:2016:i:2:d:10.1007_s10479-013-1512-3 is not listed on IDEAS
    2. Antonio Rosato, 2016. "Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 709-733, August.
    3. Julie Mortimer & Christopher Conlon, 2014. "Efficiency and Foreclosure Effects of All-Units Discounts: Empirical Evidence," 2014 Meeting Papers 1177, Society for Economic Dynamics.
    4. 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.
    5. Christopher T. Conlon & Julie Holland Mortimer, 2013. "Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence," NBER Working Papers 19709, National Bureau of Economic Research, Inc.
    6. Friberg, Richard & Romahn, André, 2015. "Divestiture requirements as a tool for competition policy: A case from the Swedish beer market," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 1-18.
    7. Christopher T. Conlon & Julie Holland Mortimer, 2013. "An Experimental Approach to Merger Evaluation," NBER Working Papers 19703, National Bureau of Economic Research, Inc.
    8. K. Sudhir & Nathan Yang, 2014. "Exploiting the Choice-Consumption Mismatch: A New Approach to Disentangle State Dependence and Heterogeneity," Cowles Foundation Discussion Papers 1941, Cowles Foundation for Research in Economics, Yale University.

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    JEL classification:

    • L0 - Industrial Organization - - General

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