Applying the Stockpiling Model to Empirical Data

This section provides details from the paper [50] that illustrate fitting the model described in the previous section to an empirical dataset from 60 stores. Consider a retail environment where customers arriving at a store belong to one of three possible segments, s = 1, 2, 3. The three segments have the following characteristics  

Segment 1 makes purchases every period to satisfy consumption of exactly one period. 

Segment 2 does not purchase at the high price level. 

Segment 3 does not purchase unless the retail price is low, i.e., lower than the average between the highest and the lowest price. 

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