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Structural demand estimation with varying product availability

Bruno, Hernán A. and Vilcassim, Naufel J. (2008) Structural demand estimation with varying product availability. Marketing Science, 27 (6). pp. 1126-1131. ISSN 0732-2399

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Identification Number: 10.1287/mksc.1080.0366

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.

Item Type: Article
Official URL: http://pubsonline.informs.org/journal/mksc
Additional Information: © 2008 INFORMS
Divisions: Management
Subjects: H Social Sciences > HF Commerce
Sets: Departments > Management
Date Deposited: 26 Jan 2017 14:08
Last Modified: 20 Jan 2020 03:47
URI: http://eprints.lse.ac.uk/id/eprint/68983

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