Speaker: Ioannis (Yannis) Stamatopoulos (McCombs School of Business)
Title: Observational price variation in scanner data cannot reproduce experimental price elasticities
Date: 17th of September , 2024 (Tuesday)
Time: 12:30-13:30
Place: EA409
Observational price variation in scanner data cannot reproduce experimental price elasticities
We present experimental evidence that the observational price variation in typical supermarket scanner data is insufficient to recover true price elasticities. We analyze a large, brick-and-mortar field experiment that generated 389,890 random, in-store prices over 35 weeks, across 409 products, at 82 “test” stores of a Midwestern grocery retailer. We compare the demand elasticity estimates derived from these experimental price changes against those derived from observational price changes at 34 “control” stores. During the experiment, the average experimental elasticity is -0.34, whereas the average observational elasticity is about -2.0. The gap is even wider in the difference in differences, and replicates at the category and the product levels. We cannot reconcile this gap by controlling for promotions, conducting an event study around each price change, focusing on base-price changes, accounting for longer-term price effects, or instrumenting with the chain price, the lagged price, the raw input price, or the wholesale price. Our findings suggest that most meaningful variation in grocery prices is tainted by endogeneity.
Bio: Ioannis (Yannis) Stamatopoulos is an Associate Professor in the Department of Information, Risk, and Operations Management at the McCombs School of Business, The University of Texas at Austin. He teaches experiential-learning courses with real industry cases and projects, as well as pricing and revenue management, operations management, and empirical methods. Professor Stamatopoulos has published extensively in top-tier journals, including Science, Management Science, Operations Research, and Marketing Science, where his work bridges the fields of operations, marketing, technology, and economics. He is an Associate Editor for the Manufacturing and Service Operations Management (MSOM) journal and serves as a judge for several research competitions. Professor Stamatopoulos holds a B.S. in Mathematics from the University of Athens and earned an M.A. in Economics, and a Ph.D. in Operations Management from Northwestern University.