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Sales and Consumer Inventory

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  • Hendel, Igal
  • Nevo, Aviv

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.

Suggested Citation

  • Hendel, Igal & Nevo, Aviv, 2001. "Sales and Consumer Inventory," Competition Policy Center, Working Paper Series qt0p18h2d8, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:compol:qt0p18h2d8
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    References listed on IDEAS

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    More about this item

    Keywords

    consumer behavior; consumer choice; stockpiling;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L - Industrial Organization

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