Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/38644 
Year of Publication: 
2004
Series/Report no.: 
CSIO Working Paper No. 0061
Publisher: 
Northwestern University, Center for the Study of Industrial Organization (CSIO), Evanston, IL
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

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