Earthquakes and Brand Loyalty: Beyond the Short-Term Effects of Product Unavailability
54 Pages Posted: 11 Feb 2019 Last revised: 21 Dec 2021
Date Written: January 30, 2019
The marketing and economics literature has investigated the impact of product unavailability on consumer choices, primarily focusing on how a stockout episode influences consumer choices during the same or the next trip. This paper focuses instead on the long-term implications of product unavailability. We leverage a quasi-natural experiment that exogenously removed the top leading beer brands from retail stores for several weeks. We test whether these prolonged stockouts can erode market shares beyond the current or subsequent purchase occasions and study the potential mechanisms at play. Using panel data of consumer purchases before and after the product shortage, we observe that the top brands only partially recovered their pre-stockout market shares, especially among their most frequent buyers. We identify a sizable portion of consumers who tried small brands for the first time during the stockout period and remained to buy those products persistently. To control for prices, state dependence, and product availability, we estimate a choice model with heterogeneous preferences and find that exposure to stockouts has long-run effects on purchase behavior. We interpret our estimates as evidence that consumers facing a restricted choice set may learn or become aware of competing products with long-lasting consequences on preferences.
Keywords: stockouts, brand loyalty, natural experiment, consideration sets
JEL Classification: M31
Suggested Citation: Suggested Citation