Brand and Quantity Choice Dynamics Under Price Uncertainty

We develop a model of household demand for frequently purchased consumer goods that are branded, storable and subject to stochastic price fluctuations. Our framework accounts for how inventories and expectations of future prices affect current period purchase decisions. We estimate our model using s...

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Bibliographic Details
Published in:Quantitative marketing and economics 2003-03, Vol.1 (1), p.5
Main Authors: Erdem, Tulin, Imai, Susumu, Keane, Michael P
Format: Article
Language:English
Subjects:
Consumer behavior
Elasticity of demand
Marketing
Price elasticity
Pricing policies
Purchasing
Online Access:Get full text
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Summary:We develop a model of household demand for frequently purchased consumer goods that are branded, storable and subject to stochastic price fluctuations. Our framework accounts for how inventories and expectations of future prices affect current period purchase decisions. We estimate our model using scanner data for the ketchup category. Our results indicate that price expectations and the nature of the price process have important effects on demand elasticities. Long-run cross price elasticities of demand are more than twice as great as short-run cross price elasticities. Temporary price cuts (or "deals") primarily generate purchase acceleration and category expansion, rather than brand switching.
ISSN:1570-7156
1573-711X
DOI:10.1023/A:1023536326497