Feel free to download and use any of the graphics, illustrations, videos, and resources on the page for educational purposes and with credit.
This work is licensed under a Creative commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
To understand how consumers' estimates on household inventory levels are biased, we develop a model of how consumers estimate the quantity of a product they have in inventory. Studies that test this model's predictions reveal that consumers fix their estimates on their average inventory level and insufficiently adjust for the actual level, adjustments from the average inventory follow an inelastic power function, and adjustments are more elastic and, consequently, more accurate when inventory is salient. These studies include two laboratory experiments for eight products and two field studies for 29 products.
Using this model, we are able to demonstrate that biased inventory estimates increase overstocking and spoilage among stockout–averse consumers, but increase stockouts and unmet demand among overstocking–averse consumers. The studies that are conducted also indicate that estimation biases are related to the extent of impulse buying, the ease of stockpiling, and the average promotional elasticity. These results provide new insights into accelerating the consumption of healthful foods and improving the targeting of sales promotions to consumers.
Wansink, Brian and Pierre Chandon (2006). How Biased Household Inventory Estimates Distort Shopping and Storage Decisions. Journal of Marketing, 70(4), 118 – 135. doi: http://dx.doi.org/10.1509/jmkg.70.4.118.