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 demand anticipation: at low prices, consumers store for future consumption. This effect, if present, has broad economic implications. We test the predictions of an inventory model using scanner data with two years of household purchases. The results are consistent with an inventory model and suggest that static demand estimates may overestimate price sensitivity.
|Original language||English (US)|
|Number of pages||19|
|Journal||RAND Journal of Economics|
|State||Published - Mar 1 2006|
ASJC Scopus subject areas
- Economics and Econometrics