Demand Estimation Under Incomplete Product Availability

Incomplete product availability is an important feature of many markets, and ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system on vending machines to track product availability every four hours. The data allow us to account for produc...

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Bibliographic Details
Published inAmerican economic journal. Microeconomics Vol. 5; no. 4; pp. 1 - 30
Main Authors Conlon, Christopher T., Mortimer, Julie Holland
Format Journal Article
LanguageEnglish
Published Pittsburgh American Economic Association 01.11.2013
Subjects
Analysis
Availability
Bias
Chocolate
Coefficients
Consumers
Datasets
Demand
Demand change
Economic models
Economic theory
Economics
Estimates
Inventories
Inventory
Microeconomics
Modeling
Sales distribution
Stock sales
Studies
Vending machines
Wireless networks
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Summary:Incomplete product availability is an important feature of many markets, and ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system on vending machines to track product availability every four hours. The data allow us to account for product availability when estimating demand, and provide valuable variation for identifying substitution patterns when products stock out. We develop a procedure that allows for changes in product availability when availability is only observed periodically. We find significant differences in demand estimates: the corrected model predicts significantly larger impacts of stock-out events on profitability.
ISSN:1945-7669
1945-7685
DOI:10.1257/mic.5.4.1