Tuesday, October 25, 2016

Consumer Demand with Unobserved Stockpiling and Intertemporal Price Discrimination

Thierry Magnac (Toulouse School of Economics) and Pierre Dubois (Toulouse School of Economics) theorize about Consumer Demand with Unobserved Stockpiling and Intertemporal Price Discrimination.

ABSTRACT:We construct a tractable structural dynamic model of consumption, purchase and stocks by consumers for whom stockpiling is unobserved and for whom preferences are isolastic and affected by independent and identically distributed shocks. Consumers purchase in stores which they meet randomly and which are supposed to maximize short run profits. We show that a two-price mixed strategy by stores satisfies conditions for an equilibrium in which consumers and stores coordinate their expectations on this stationary solution. We derive a simple and tractable estimation method using log linearized demand equations and equilibrium conditions. We estimate parameters using scanner data registering soda purchases by French consumers during 2005-2007.


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