Earthquakes and Brand Loyalty: Beyond the Short-Term Effects of Stockouts

Abstract

We exploit a natural experiment that exogenously removed the top leading brands from the retail stores for several weeks to study whether prolonged stockouts can erode market shares persistently. Using a panel data of consumer purchases before and after the product shortage, we observe that the top brands only partially recovered their pre-stockout market shares. Controlling for prices, state dependence and product availability in a choice model with heterogeneous preferences, we find that the less popular brands increase their valuations among those consumers more exposed to stockouts. We interpret our estimates as evidence that changes in the consideration set forced consumers to become increasingly aware of competing products with long-lasting effects in purchase behavior.