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Title:Sales and consumer inventory PDF Logo
Authors:Hendel, Igal
Nevo, Aviv
Issue Date:2004
Series/Report no.:CSIO working paper 0061
Abstract:Temporary price reductions (sales) are common for many goods and naturally result in a large 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 economic implications. We construct a dynamic model of consumer choice, use it to derive testable predictions and test these predictions using two years of scanner data on the purchasing behavior of a panel of households. The results support the existence of household stockpiling behavior and suggest that static demand estimates may overestimate price sensitivity.
Document Type:Working Paper
Appears in Collections:CSIO Electronic Working Papers, Northwestern University

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