The positive and negative effects of inventory on category purchase: An empirical analysis

Content Provider	Semantic Scholar
Author	Bell, David R. Boztug, Yasemin
Copyright Year	2007
Abstract	Product inventory exerts two countervailing forces on the probability of purchase: More inventory on hand reduces the need to purchase; however, theory suggests higher levels of inventory can drive up consumption, thereby increasing the chance of purchase. Moreover, consumers have biased estimations of their own inventory—especially at high levels of inventory (Chandon and Wansink, 2006), which again suggests a positive relationship between inventory and purchase probability.We model the negative (standard) and positive effects of inventory on the probability of purchase. The model is calibrated on ten product categories and fits better than the standard nested logit and an alternative developed by Ailawadi and Neslin (1998). The elasticity of purchase incidence with respect to inventory represents these opposing forces in an intuitive way, implying an inventory threshold below (above) which the net effect is positive (negative). Estimated thresholds are plausible across categories, with the food categories of hot dogs, ice cream and soft drinks showing the largest effects.
Starting Page	1
Ending Page	14
Page Count	14
File Format	PDF HTM / HTML
DOI	10.1007/s11002-006-9001-y
Alternate Webpage(s)	https://faculty.wharton.upenn.edu/wp-content/uploads/2012/04/05_Bell-and-Boztug-(2007)-ML.pdf
Alternate Webpage(s)	https://doi.org/10.1007/s11002-006-9001-y
Volume Number	18
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article