PRICE SEARCH ACROSS STORES AND ACROSS TIME By Navid Mojir and K. Sudhir March 2014 Updated March 2016 COWLES FOUNDATION DISCUSSION PAPER NO. 1942 COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
نویسندگان
چکیده
In response to price dispersion across stores and price promotions over time, consumers search across both stores (spatial) and time (temporal), in many retail settings. Yet there is no search model in extant research that jointly endogenizes search in both dimensions. We develop a model of spatiotemporal search that nests a finite horizon model of spatial search across stores within an infinite horizon model of inter-temporal search. The model is estimated using an iterative procedure that formulates it as a mathematical program with equilibrium constraints (MPEC) embedded within an E-M algorithm to allow estimation of latent class heterogeneity. The empirical analysis uses data on household store visits and purchases in the milk category. In contrast to extant research, we find that omitting the temporal dimension underestimates price elasticity. We attribute this difference to the relative frequency of household stock outs and purchase frequency in the milk category. Further, contrary to the conventional wisdom that promotions increase store switching and reduces store loyalty, we find that in the presence of search frictions, price promotions can be a store loyalty-enhancing tool.
منابع مشابه
1942 Cowles Foundation for Research in Economics
Despite evidence that consumers search across both stores (spatial) and time (temporal), the search literature models search in only one dimension. We develop a model of spatiotemporal search that nests a finite horizon model of spatial search within an infinite horizon model of intertemporal search. The model is estimated using an iterative procedure that formulates it as a mathematical progra...
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