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—Structural Demand Estimation with Varying Product Availability

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  • Hernán A. Bruno

    (Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, The Netherlands)

  • Naufel J. Vilcassim

    (London Business School, London NW1 4SA, United Kingdom)

Abstract

This paper develops a model that extends the traditional aggregate discrete-choice-based demand model (e.g. Berry et al. 1995) to account for varying levels of product availability. In cases where not all products are available at every consumer shopping trip, the observed market share is a convolution of two factors: consumer preferences and the availability of the product in stores. Failing to account for the varying degree of availability would produce incorrect estimates of the demand parameters. The proposed model uses information on aggregate availability to simulate the potential assortments that consumers may face in a given shopping trip. The model parameters are estimated by simulating potential product assortment vectors by drawing multivariate Bernoulli vectors consistent with the observed aggregate level of availability. The model is applied to the UK chocolate confectionery market, focusing on the convenience store channel. We compare the parameter estimates to those obtained from not accounting for varying availability and analyze some of the substantive implications.

Suggested Citation

  • Hernán A. Bruno & Naufel J. Vilcassim, 2008. "—Structural Demand Estimation with Varying Product Availability," Marketing Science, INFORMS, vol. 27(6), pages 1126-1131, 11-12.
    • Handle: RePEc:inm:ormksc:v:27:y:2008:i:6:p:1126-1131
    DOI: 10.1287/mksc.1080.0366
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    References listed on IDEAS

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    7. Patalinghug, Jason C., 2013. "The Effect of Advertising and In-Store Promotion on the Demand for Chocolate," Working Paper series 159981, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
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    15. van Ewijk, Bernadette J. & Gijsbrechts, Els & Steenkamp, Jan-Benedict E.M., 2022. "What drives brands’ price response metrics? An empirical examination of the Chinese packaged goods industry," International Journal of Research in Marketing, Elsevier, vol. 39(1), pages 288-312.
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