Demand Estimation Under Incomplete Product Availability

52 Pages Posted: 8 Sep 2008 Last revised: 12 Feb 2021

See all articles by Christopher T. Conlon

Christopher T. Conlon

Columbia University

Julie H. Mortimer

Boston College; National Bureau of Economic Research (NBER); Harvard University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2008

Abstract

Incomplete product availability is an important feature of many markets; ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system installed on 54 vending machines to track product availability every four hours. The data allow us to account for product availability when estimating demand, and provides a valuable source of variation for identifying substitution patterns. We develop a procedure that allows for changes in product availability even when availability is only observed periodically. We find significant differences in demand estimates, with the corrected model predicting significantly larger impacts of stock-outs on profitability.

Suggested Citation

Conlon, Christopher T. and Mortimer, Julie H., Demand Estimation Under Incomplete Product Availability (September 2008). NBER Working Paper No. w14315, Available at SSRN: https://ssrn.com/abstract=1264577

Christopher T. Conlon (Contact Author)

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Julie H. Mortimer

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