Date of this Version
Quantitative Marketing and Economics
We revisit and test Salop and Stiglitz (1982) Theory of Sales. Equilibrium comparative static predictions are that greater consumer storage constraints lead to: (1) higher average prices, (2) fewer promotions, and (3) shallower promotions. In equilibrium, price dispersion is nonlinear in storage constraints, first increasing then decreasing. Empirical estimates of storage constraints are developed for approximately 1,000 households using the American Housing Survey (1989), United States Census (1990), and Stanford Market Basket Database (1991–1993). We find consumers with greater storage constraints shop more often and purchase smaller quantities per visit; moreover, the comparative static predictions are supported and evidence consistent with the equilibrium dispersion prediction is observed. Estimated quantitative effects are economically important.
This is a pre-publication version. The final publication is available at Springer via http://dx.doi.org/10.1007/s11129-006-8127-9
consumer behavior, housing constraints, price promotion, retail prices, storage
Bell, D. R., & Hilber, C. A. (2006). An Empirical Test of the Theory of Sales: Do Household Storage Constraints Affect Consumer and Store Behavior?. Quantitative Marketing and Economics, 4 (2), 87-117. http://dx.doi.org/10.1007/s11129-006-8127-9
Advertising and Promotion Management Commons, Behavioral Economics Commons, Business Administration, Management, and Operations Commons, Business Analytics Commons, Business Intelligence Commons, Management Information Systems Commons, Management Sciences and Quantitative Methods Commons, Marketing Commons, Operations and Supply Chain Management Commons, Organizational Behavior and Theory Commons, Sales and Merchandising Commons
Date Posted: 15 June 2018
This document has been peer reviewed.