Earthquakes and Brand Loyalty: Beyond the Short-Term Effects of Stockouts

36 Pages Posted: 11 Feb 2019

See all articles by Cristian Figueroa

Cristian Figueroa

Boston College, Students

Andres Musalem

Universidad de Chile

Carlos Noton

Dept of Industrial Engineering - University of Chile

Date Written: January 30, 2019

Abstract

We exploit a natural experiment that exogenously removed the top leading brands from the retail stores for several weeks to study whether prolonged stockouts can erode market shares persistently. Using a 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. Controlling for prices, state dependence and product availability in a choice model with heterogeneous preferences, we find that the less popular brands increase their valuations among those consumers more exposed to stockouts. We interpret our estimates as evidence that changes in the consideration set forced consumers to become increasingly aware of competing products with long-lasting effects in purchase behavior.

Keywords: stockouts, brand loyalty, natural experiment, consideration sets

Suggested Citation

Figueroa, Cristian and Musalem, Andres and Noton, Carlos, Earthquakes and Brand Loyalty: Beyond the Short-Term Effects of Stockouts (January 30, 2019). Available at SSRN: https://ssrn.com/abstract=3325923 or http://dx.doi.org/10.2139/ssrn.3325923

Cristian Figueroa

Boston College, Students ( email )

MA
United States

Andres Musalem

Universidad de Chile ( email )

Beauchef 851
Santiago
Chile

HOME PAGE: http://www.dii.uchile.cl/~amusalem

Carlos Noton (Contact Author)

Dept of Industrial Engineering - University of Chile ( email )

Beauchef 851
Santiago, RM
Chile

HOME PAGE: http://www.dii.uchile.cl/~cnoton/

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