Marketing Papers

Document Type

Journal Article

Date of this Version

3-2004

Publication Source

Quantitative Marketing and Economics

Volume

2

Issue

1

Start Page

59

Last Page

92

DOI

10.1023/B:QMEC.0000017035.35940.60

Abstract

An important question for retailers is whether promotions induce households to increase their in-store expenditures or merely reallocate a predetermined shopping budget. Should expenditures be fixed, retailers might decrease their profitability when running promotions by displacing expenditures from high margin to lower margin products. Using household level store receipts and an extended AIDS model, we provide evidence that while household expenditures do increase with promotions, there is also a significant reallocation of expenditures among the different categories. This implies that retailers have to choose carefully which products are promoted, if promotions are to increase profits.

Comments

“The final publication is available at Springer via http://dx.doi.org/10.1023/B:QMEC.0000017035.35940.60”.

Keywords

consumer demand theory, market basket, household expenditures, AIDS model, econometric, estimation

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Date Posted: 27 November 2017

This document has been peer reviewed.