Pricing Behavior in Markets with State-Dependence in Demand

摘要: Marketing researchers have documented significant biases in estimated price elasticities from brand choice models that ignore state dependence effects. Yet empirical research on firm behavior has thus far ignored the effects of dependence. In this paper we investigate supply side consequences ignoring using household-level data cereal category. Our key results are as follows: We find evidence both positive (i.e. inertia) and negative variety-seeking) Ignoring demand inferences about behavior. Specifically, attribute observed prices category to tacit collusion between manufacturers, when fact accounting for shows competitive is indeed non-cooperative. firms forward looking they incorporate effect their current future profits. However, relative "bang buck," terms improvements prediction fit, much greater modeling than inter-temporal side.