Sales and Consumer Inventory

University of California, Berkeley, Center for Competition Policy Working Paper No. CPC01-25

37 Pages Posted: 18 Feb 2004

See all articles by Igal Hendel

Igal Hendel

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Aviv Nevo

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

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.

Keywords: consumer behavior, consumer choice, stockpiling

JEL Classification: M3, L1

Suggested Citation

Hendel, Igal E. and Nevo, Aviv, Sales and Consumer Inventory (September 2001). University of California, Berkeley, Center for Competition Policy Working Paper No. CPC01-25. Available at SSRN: https://ssrn.com/abstract=502723 or http://dx.doi.org/10.2139/ssrn.502723

Igal E. Hendel (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Aviv Nevo

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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