SIMULATING FOOD SHOPPERS' ECONOMIC LOSSES AS A RESULT OF SUPERMARKET UNAVAILABILITY

This study illustrates a methodology as a first step toward the development of a benefit/cost model for the evaluation of the Federal Trade Commission regulation of the unavailability of advertised specials in food stores. A Monte Carlo simulation was used to estimate economic losses to shoppers from unavailable advertised specials. Product unavailability in the model occurred as a result of alternative managerial decisions about purchase‐order quantities for advertised specials and shelf‐stocking policies combined with probabilistic purchase decisions by customers. The model generated probabilistic individual customer and management behavioral responses to unavailability during a one‐year time period. As a result, the derived economic losses to customers from unavailability were based on alternative assumptions about managerial behavior in conjunction with empirically derived shopper responses to advertised specials. This study thus provides some idea of the amount of damages being caused by the excessive unavailability of advertised specials. Aggregate customer losses were found to vary primarily with respect to management's purchase‐order quantity of advertised specials.