Demand for Nondurable Goods: a Shortcut to Estimating Long-Run Price Elasticities

  • Authors: Helena Perrone.
  • RAND Journal of Economics, Vol. 48 , No 3 ,856-873, September, 2017.

When consumers stockpile, static demand models overestimate long-term price responses. This article presents a dynamic model of demand with consumer inventories and proposes a shortcut to estimate the long-run price elasticities without having to solve the dynamic program. Using French data on food purchases, I find elasticities consistent with those that result from the full-blown estimations found in the literature.

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