Demand Estimation with Availability Variation

Abstract

Estimates of demand are identified from variation in the choice sets that consumers face and the corresponding purchase probabilities for individual products. Retail settings often provide an opportunity to observe variation in consumer choice sets that arises not only through changes in observable product characteristics, such as price, but also through changes in product availability. We review the literature that develops methods for estimating demand in these settings, with emphasis on two mechanisms through which product availability may vary: product assortment decisions, and stockout events. We also briefly discuss variation in availability that may arise from limited consumer information.