An empirical test of the theory of sales: do household storage costs affect consumer and store behavior?

Bell, David R. and Hilber, Christian A. L. ORCID: 0000-0002-1352-495X (2004) An empirical test of the theory of sales: do household storage costs affect consumer and store behavior? Utrecht School of Economics working papers (05-23). Utrecht School of Economics, Utrecht, The Netherlands.

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Abstract

We revisit and test Salop and Stiglitz (1982) Theory of Sales. Equilibrium predictions are that higher consumer storage costs lead to: (1) higher average prices, (2) fewer promotions, and (3) shallower promotions. Empirical estimates of storage cost are developed for approximately 1,000 households using the American Housing Survey (1989), United States Census (1990), and Stanford Market Basket Database (19911993). A test of the key assumption finds consumers with higher storage costs shop more often and purchase smaller quantities per visit; moreover, all three equilibrium predictions are supported. The estimated quantitative effects on shopping frequency and prices are economically important.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://ideas.repec.org/s/use/tkiwps.html
Additional Information:	© 2004 The Authors
Divisions:	Geography & Environment
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Date Deposited:	26 Nov 2008 11:13
Last Modified:	11 Dec 2024 18:40
URI:	http://eprints.lse.ac.uk/id/eprint/8311

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