Received: 22 October 2018 Revised: 16 December 2019 Accepted: 30 December 2019

DOI: 10.1002/joom.1082

RESEARCH ARTICLE

The impact of disclosing inventory-scarcity messages

on sales in online retailing

Sungho Park1,2 | Elliot Rabinovich3 | Christopher S. Tang4 | Rui Yin3

1
Marketing Department, W. P. Carey
School of Business, Arizona State
Abstract
University, Tempe, Arizona To influence demand, some online retailers post messages (e.g., “5 units or less
2
SNU Business School, Seoul National left in stock”) on their product pages to signal impending stockouts. These
University 1 Gwanak-ro, Gwanak-gu,
“scarcity” messages provide consumers “partial” inventory information, reveal-
Seoul, 08826, South Korea
3
Supply Chain Management Department,
ing only an upper bound on the number of units available for sale. To examine
W. P. Carey School of Business, Arizona the impact of these messages, we obtained price and sales data from an online-
State University, Tempe, Arizona retailer website across a sample of durable goods before and after the retailer
4
Business Administration, Anderson
posted the messages over multiple inventory-replenishment cycles. We then
School of Management, University of
California, Los Angeles, California used these data to assess empirically the effect of these messages on these
products' daily sales. We find that disclosing these messages can decrease daily
Correspondence
sales by an average of 17.60%. This finding suggests that scarcity messages such
Elliot Rabinovich, Supply Chain
Management Department, W. P. Carey as these can have a negative influence on the sales prospects of durable goods.
School of Business, Arizona State We also observe, on the other hand, that price discounts are quite effective in
University, Tempe, AZ 85287-4706.
Email: elliot.rabinovich@asu.edu
increasing sales and offsetting the losses induced by scarcity messages. On
average, a reduction of 1% in stock keeping unit price increases daily sales by
Handling Editor: Michael Galbreth approximately 3%. Therefore, relative to disclosing scarcity messages, price dis-
counts are a much more effective tool at increasing inventory turns.

KEYWORDS
econometrics, inventory management, online retailing, operations management-marketing
interface

1 | INTRODUCTION retailers' goal is to induce consumers not to miss out on

Low search costs on the Internet enable consumers to
compare many retail offers freely which, in turn, exacer-
bates certain purchasing behaviors, including the active
pursuit of bargains (Brynjolfsson & Smith, 2000; Zhang,
Fang, & Sheng, 2006) and the postponement of purchases
in anticipation of future price drops (Aviv, Tang, & Yin,
2009; Netessine & Tang, 2009). To counteract these
behaviors, many online retailers conduct “flash sales”
events of deeply discounted stock keeping units (SKUs)
for limited times (usually 24 hr) during which they make
available to consumers real-time information on every
SKU's inventory level available for purchase. The
these events by showing them how fast inventory is
decreasing for the SKUs. According to empirical research
by Cui, Zhang, and Bassamboo (2018) and Wagner,
Calvo, and Cui (2018), exposing consumers to informa-
tion on these inventory reductions significantly increases
the deals' frequency of purchase.
These findings, however, are limited to a small frac-
tion of online retail sales, since the vast majority of e-
commerce purchases involve durable goods available for
sale over indefinite time horizons and multiple inventory
replenishment cycles. The selling strategies in these
mainstream environments differ notably from those in
“flash sales” settings, where retailers typically promote

J Oper Manag. 2020;1–19. wileyonlinelibrary.com/journal/joom © 2020 Association for Supply Chain Management, Inc. 1
2 PARK ET AL.
heavily discounted items in limited quantities (i.e., with
no inventory replenishments) and for extremely short
durations to attract bargain hunters who are inherently
interested in taking advantage of these temporary promo-
tions. Consequently, these consumers are naturally more
likely to purchase when they observe that inventory is
running low (Ferreira, Lee, & Simchi-Levi, 2016;
Sodero & Rabinovich, 2017).
This is not necessarily the case in mainstream settings
involving durable goods, where consumers often make
purchasing decisions based on their personal needs, as
opposed to opportunistically, upon encountering
discounted offers available during short time windows.
For these consumers, low inventory levels may actually
undermine their confidence in the retailer's quality of ser-
vice (Balakrishnan, Pangburn, & Stavrulaki, 2004). They
may also have an adverse influence in their inferences
regarding products' quality in relation to other items that
are available for sale currently or may become available
in the future. Specifically, a low inventory amount may
lead consumers to infer that the retailer has chosen to
forego replenishing its inventory because the products
are undesirable, of low quality, or likely to become obso-
lete (Koschat, 2008). To the extent that low search costs
on the Web make it easy for consumers to look for prod-
ucts elsewhere (Bakos, 1997), low stock quantities may
actually induce them to forego buying these items and
reduce sales (Koschat, 2008; Wolfe, 1968).
Another important consideration is that SKUs sold
through flash sales events are offered at prices that typi-
cally remain fixed regardless of how fast inventory is
depleted. This is generally not the case for products in
mainstream environments. Because these items are avail-
able for sale over indefinite time horizons and multiple
inventory replenishment cycles, their prices normally fluc-
tuate with inventory levels. Such conditions are not com-
monly present in flash sales settings, making it difficult to
evaluate whether lower prices or inventory availability are
more effective in promoting online sales in those settings.
Our goal is to address these deficiencies in the litera-
ture. A challenge in fulfilling this objective is that many
online retailers in mainstream settings have chosen not
to share with the public exact inventory level information
because disclosing such information may give their com-
petitors and suppliers sensitive insights into their inven-
tory management and pricing policies (Fisher, Gallino, &
Li, 2017). However, there are retailers (e.g., Walmart and
Overstock) that have chosen to disclose “partial” inven-
tory information contained in messages alerting con-
sumers about the maximum number of units available in
stock when actual inventory levels drop below this upper
bound. For instance, by posting a message alerting shop-
pers that an SKU has “5 units or less left in stock” when
inventory drops below this threshold, retailers can let
consumers know of the maximum amount of inventory
available for sale. However, since these “scarcity mes-
sages” contain only partial inventory information, con-
sumers (as well as competitors and suppliers) will not
know the exact inventory levels available for sale at any
point before purchase.
To our knowledge, no research has evaluated the
impact of these scarcity messages' disclosure on durable
consumer goods' sales in mainstream online retail envi-
ronments. We are only aware of a study by Sodero,
Rabinovich, Aydinliyim, and Pangburn (2017) that also
focused on these settings. However, this study focused on
the link between purchasing frequencies (not total sales)
and inventory depletion at low levels, in which
inventory-level information is displayed continuously to
consumers at all times. Therefore, Sodero et al. (2017)
were unable to estimate the impact of the initial disclo-
sure of scarcity information on sales because they focused
exclusively on consumers' purchasing rates and had no
way of making comparisons “before” versus “after” con-
sumers' exposure to scarcity information. Because we can
evaluate the differences in sales that exist before versus
after a retailer posts this information for its products, we
can expand on Sodero et al.'s (2017) analysis. Moreover,
because the disclosure of scarcity messages is potentially
applicable as a widespread mechanism to influence con-
sumers' purchasing behavior, our research not only has
academic relevance, but also carries significant implica-
tions for practitioners in the retail industry.
To evaluate the aforementioned issues, we collected
data (prices, sales, etc.) from a sample of SKUs sold by a
focal retailer that posted scarcity messages with partial
inventory scarcity information (“5 or less left in stock”)
every time the inventory level of an SKU dropped below
6 units. Because this retailer sells durable consumer
goods available for purchase with no time or inventory-
cycle restrictions, we can examine the impact that post-
ing these messages has on sales for each SKU over
extended periods. In so doing, we can partial out time
effects from the effects of inventory messages' disclosure
on sales, since it is possible that the time a product has
been available for sale will influence demand. Further-
more, having no limitations imposed by the retailer on
the amount of time products are available for sale means
that we can examine the effects of these messages' disclo-
sure on sales for each SKU longitudinally while isolating
significant differences in these effects across products
selling in large versus small daily amounts due to season-
ality. Finally, because prices in our data vary over time,
we can also isolate these effects from longitudinal price
fluctuation effects on sales. To our knowledge, no paper
has evaluated these effects in an online setting. This is
PARK ET AL.
despite the fact that this evaluation carries important
implications about the effectiveness of scarcity messages
for retailers because it can quantify the equivalency
between the effect of these messages on product sales
and the effect of price discounts.
Contrary to results in flash sales environments (Cui
et al., 2018; Wagner et al., 2018) showing that consumers'
exposure to inventory scarcity messages improves sales,
we find that such exposure reduces daily sales by an aver-
age of 17.60%. This is consistent with research in offline
settings by Wolfe (1968) and Koschat (2008), among
others. According to this research, when consumers make
buying decisions for products based on demand needs,
instead of opportunistically based on the availability of
deep but short-lived discounts, low inventory levels will
influence adversely consumers' inferences regarding the
retailers' quality of service as well as the quality of the
products offered in relation to other items that are avail-
able for sale currently or may become available for sale in
the future.
In contrast, our results reveal that price discounts are
more effective at increasing sales. We find that a 1%
decrease in price leads to a 3.20% increase in daily sales.
Therefore, daily sales are highly sensitive to variations in
product prices. One important consideration is that these
effects are applicable to all SKUs regardless of price and,
therefore, they carry greater benefit for SKUs sold at lower
price points, for which discounts will be lower in absolute
terms. Moreover, these results remain consistent while
controlling for the effects of scarcity messages' disclosure
on sales for each SKU selling in large versus small daily
amounts. As a result, price discounts will carry greater
value in increasing inventory turns when applied to high-
selling items.
The remainder of our article proceeds as follows.
Section 2 presents a review of the literature and expands
on the theory relevant to our study. Section 3 expands
upon the study's empirical methodology. Sections 4 and 5
present the statistical analyses. Finally, Section 6 presents
the study's conclusions, implications, and opportunities
for future research.
2 | LITERAT U RE R EVI EW A N D
THEORETICAL FRAMEWORK
Our article is positioned broadly along with other
research at the interface between the operations manage-
ment (OM) and marketing literatures that has studied a
variety of phenomena in Internet environments (Boyer,
Hallowell, & Roth, 2002; Rao, Rabinovich, & Raju, 2014;
Rosenzweig, Laseter, & Roth, 2011). The papers by Cui
et al. (2018), Wagner et al. (2018), and Sodero et al.
3
(2017), we discussed earlier are part of this body of work.
So are papers that have examined empirically the impact
of inventory displays on sales in offline settings. In gen-
eral, these studies have evaluated how perceptions of
inventory abundance influence shoppers' purchasing
decisions. To evaluate this phenomenon empirically,
these studies have had to tackle a variety of endogeneity
concerns (particularly those involving sales, inventory
levels, and pricing) that exist in traditional, brick, and
mortar environments. In the fashion industry, Wolfe
(1968) and Boada-Collado and Martinez-de-Albeniz
(2019) examined the impact of inventory levels on sales
across items offered at different retail stores and found
that inventory levels have a positive effect on sales.
Koschat (2008) observed a similar effect on the sale of
magazines at retail stores. Focusing on the automotive
industry, Cachon, Gallino, and Olivares (2018) showed
that scarcity at auto dealers can increase sales but this
effect vanishes as variety increases.
Akin to these studies, we are interested in the sale of
durable goods that consumers may purchase without
time limitations and over multiple inventory cycles. In so
doing, we also contribute to an additional stream of liter-
ature in OM that has analyzed how sellers can benefit
from disclosing opaque inventory information for this
type of goods. As part of these strategies, sellers may only
disclose information about the availability of a product
but not the availability of that product's variants. For
instance, a seller may reveal the exact amount of inven-
tory available for a set of cloth napkins but not the exact
amount available for specific colors. Through this strat-
egy, sellers can discriminate among consumers who are
sensitive about the availability of inventory for each of
the product's variants versus those who are not. Jerath,
Netessine, and Veeraraghavan (2010) observed that this
strategy discourages consumers from waiting to purchase.
More recently, Cui and Shin (2017) showed that when a
seller offers multiple variants of the same product and
the specific variant preferred by consumers is likely to
stock out, the seller should disclose aggregate inventory
levels across the variants to increase sales.
The type of inventory information disclosure that we
consider in our article can be interpreted as a variation of
the type of opaque information examined by Jerath et al.
(2010) and Cui and Shin (2017). In our case, the timing
of the release of the scarcity message that the seller pro-
vides to consumers and the contents of this message (“5
or less left in stock”) are uniform across products and
remain unchanged over time. That is, the retailer releases
the same message when stock levels fall below 6 units,
regardless of the SKU. Moreover, the message's content
does not change as a function of the actual amount of
inventory available (5, 4, 3, 2, or 1 units) for an SKU.
4 PARK ET AL.
Thus, after the retailer posts this message, consumers will
know that the upper bound of the inventory level is
5 units. On the other hand, before this message is dis-
played, consumers will know that there are at least 6 units
available for sale; however, this is of little use for con-
sumers since they will not know the extent to which the
actual inventory level is above 6 (i.e., the actual inventory
level can be 7 or 7,000 units). Essentially, by posting these
scarcity messages, the retailer is effectively sharing with
consumers' inventory information with different levels of
precision at different points in time. “Before” the scarcity
message is disclosed, consumers will only know the mini-
mum value in the range of inventory amounts available
(i.e., 6 units). However, “after” the posting of this mes-
sage, consumers will know there is a specific range in the
inventory amounts available (of from 1 to 5 units).
To understand the influence of this inventory informa-
tion on sales of durable goods in an online environment,
we focus on the “demand effect” initially identified by
Koschat (2008) and Balakrishnan et al. (2004);
Balakrishnan, Pangburn, and Stavrulaki (2008) in offline
settings. This effect reflects the changes in a product's
demand function caused by consumers' exposure to inven-
tory information (in our case, it is the information about
the maximum number of units available for sale contained
in scarcity messages). This demand effect may induce two
countervailing forces that can cause a product's daily sales
to increase or decrease. On one hand, the demand effect
may manifest itself in an increase in the intensity of scarcity
perceptions among consumers after the retailer posts scar-
city messages with information on an upper bound for
products' inventory. According to commodity theory
(Brock, 1968), these product scarcity perceptions can cre-
ate a “buying frenzy” among consumers who are particu-
larly sensitive about possible stockouts (DeGraba, 1995)
and have a positive utility from owning products that are
not commonly available (Lynn, 1991). This implies that
the disclosure of the upper bound information for prod-
ucts' inventory can “nudge” consumers to commit to their
purchases earlier, which will increase SKU sales.
On the other hand, scarcity messages can generate an
opposite force that can discourage consumer purchases
(Urban, 2005). Specifically, because scarcity messages
inform consumers that stock levels are low, they may
undermine consumers' confidence about the retailer's
level of service (Balakrishnan et al., 2004). Consumers
may also infer that the retailer has chosen to forego
replenishing its inventory because the products are unde-
sirable, of low quality, or likely to become obsolete
(Koschat, 2008). To the extent that low search costs on
the Internet make it easy for consumers to look for other
products elsewhere (Bakos, 1997), the disclosure of this
inventory information may induce shoppers to forego
buying these items. Hence, the posting of scarcity mes-
sages can have a negative impact on SKU daily sales.
The juxtaposition of these opposite forces caused by the
disclosure of scarcity messages with inventory upper bound
information may result in one of two possible demand
effect outcomes regarding SKU sales. On one hand, this dis-
closure may create scarcity perceptions among consumers
and increase sales if product offers are rare. Alternatively, it
may undermine consumers' confidence in the retailer's
quality of service or signal that the products are being
phased out by the retailer because of low quality or because
they are past their peak. As a result, it will decrease sales.
Hypotheses 1 and 2 summarize these opposite effects.
Hypothesis 1 The disclosure of scarcity messages with
inventory upper bound information will increase
SKU sales.
Hypothesis 2 The disclosure of scarcity messages with
inventory upper bound information will decrease
SKU sales.
3 | EMPIRICAL METHODOLOGY
To conduct our empirical analysis and test the aforemen-
tioned hypotheses, we collected data from Bon-Ton (BT),
a multichannel retailer selling a variety of durable goods
in the apparel, accessories, home furnishings, home
appliances, and toy categories. Founded in 1898, BT sold
products exclusively through catalogs and stores up until
2005, when it added its online channel. With annual net
revenues of $2.7 billion in 2017 and 20% year over year
growth in Internet sales (totaling almost $200 million
annually by 2017), BT's online channel has become a
major source of revenue for the company.
We chose to use BT as a single focal retailer for our
empirical analysis in order to hold constant various factors
that could influence demand parameters independently of
the demand effect caused by inventory scarcity messages.
These factors include the retailer's brand (Chevalier &
Goolsbee, 2003; Smith & Brynjolfsson, 2001), Web interface
attributes (Olson & Boyer, 2003), and ordering, fulfillment,
and product return options (Rabinovich, Sinha, & Laseter,
2011; Rao, Griffis, & Goldsby, 2011). In this sense, our
choice to focus on a single retailer for our empirical evalua-
tion follows a similar logic behind a variety of studies that
have used this approach to study a range of phenomena
related to Internet operations (Olson, Belohlav, &
Boyer, 2005).
In each of its SKUs' online displays, BT posts a scarcity
message as soon as inventories available for sale fall below
6 units. Once stocks go below this threshold, BT displays a
PARK ET AL.
F I G U R E 1 Inventory scarcity
message posted on Bon-Ton's website
[Color figure can be viewed at
wileyonlinelibrary.com]
message on each product's page with limited inventory
information letting consumers know that there are “5
[units] or less left in stock” for the SKU (please see
Figure 1 for an example of this type of display). Although
at the time we collected our data, BT operated an online
and a brick-and-mortar channel, we selected for our analy-
sis products that were available for sale exclusively through
the online channel, as advertised for each product on the
retailer's website. In doing so, we wanted to ensure that
the measurement of the demand effect in the online chan-
nel caused by the sharing of scarcity messages with con-
sumers was not biased by inventory availability at the
store channel. Because BT offered all SKUs in its apparel
category through the online and store channels, we did
not include this category in our analysis. Also, note that
although BT sold exclusively online the SKUs, we chose
for our study, these items or similar substitutes were avail-
able for sale elsewhere. Therefore, the SKUs' availability
was not exclusive to BT.
3.1 | Data collection
We focused on SKUs available for sale online across
28 different SKU categories, including accessories, home
furnishings, home appliances, and toy categories. For
each SKU, we obtained data provided by Cartbound, an
online platform that monitored pricing and inventory
information posted online by BT during a period of
18 months (from August 1, 2014 to January 31, 2016).
Although during this period BT posted a scarcity message
(“5 or less left in stock”) every time the inventory of an
SKU dropped below 6 units and did not disclose on its
product webpages information about the exact inventory-
5
level available for each SKU, it did maintain exact
inventory-level information in the source code for each of
its SKUs' webpages. This enabled Cartbound to track the
exact inventory levels available for each SKU over time.
Cartbound also tracked when BT posted its inventory
scarcity message. By recording the actual inventory levels
for each SKU, Cartbound could track when reductions in
inventory levels occurred as well as the magnitude of
these reductions. From Cartbound's information, we
could then estimate the daily sales rate for each SKU.
In total, 199 SKUs had multiple replenishment cycles
in which BT posted inventory scarcity messages during
our 18-month time window. We focused on these
199 SKUs in our study so that we can evaluate the effect
of BT's disclosure of inventory scarcity messages on sales.
Figure 2 shows the distribution of the number of SKUs
across different product types in our data.
We measured sales for each SKU in terms of the
“number of units sold per day.” We used days as the unit
of measurement for this variable because the SKUs in the
sample include exclusively durable consumer goods,
which are sold infrequently and are not subject to sharp
rates of perishability. As Cartbound monitored for
changes in inventory levels, it also monitored in parallel
for changes in prices made by BT for each of the SKUs in
the sample. We used this information to obtain each SKU
price charged by BT over time, including the instances
when sales took place. From the data, we found that, on
average, BT changed the prices of the SKUs every
14.2 days (SD = 7.5 days). Therefore, the unit of measure-
ment in days appears to be sufficiently granular relative
to the frequency of changes in SKU prices.
In Appendix A, we expand our discussion on: (a) our
data collection methodology; (b) a variety of analyses we
6 PARK ET AL.

F I G U R E 2 Distribution of the
number of stock keeping units
across product types [Color figure
can be viewed at
wileyonlinelibrary.com]

TABLE 1 Descriptive statistics

Variable Daily sales Price Scarcity message Inventory level

Daily sales (Number of units) 1
Price (dollars) −0.014 1
Scarcity message (1 = Yes, 0 = No) −0.063 −0.030 1
Inventory level (Number of units) 0.110 0.006 −0.370 1
Average 0.77 383.50 0.28 37.38
Standard deviation 4.80 330.83 0.45 59.26
Minimum 0 19.99 0 0
Maximum 381 3,075 1 696
Number of observations 27,044 27,044 27,044 27,044

conducted to test the robustness of the measurements of
daily sales; and (c) the robustness of the estimations of
demand effect by scarcity messages' disclosure on daily
sales we obtained in Section 4. Note that to generate
these measurements and effect estimations, we account
for the fact that the SKUs in our sample were not con-
stantly available for sale during the 18-month sample
period. Specifically, BT introduced 183 of the sample
SKUs to its assortment after the start of our observation
period and removed 180 SKUs before the end of this
period. On average, SKUs were available for 142 days
during the observation period. Moreover, there were days
during this period when inventory for different SKUs
decreased down to zero, making it impossible for con-
sumers to purchase these products during these days.
Consequently, to prevent biases in our measures of daily
sales, we removed from consideration a total of 1,634
SKU-day observations when these out-of-stocks (OOS)
occurred.
Ultimately, the measurements of daily sales for each
SKU excluded the OOS days between the dates of the sales
that depleted the SKU's inventory and the dates of the
SKU's replenishment. Therefore, each SKU's daily sales
measurements excluded all zero-unit “sales” observed dur-
ing these OOS days. Furthermore, our analyses used SKU
fixed effects to control for any biases in our results caused
by the late entry or early removal of SKUs from BT's
assortment as well as to account for any other time-
invariant effects inherent to each SKU that might have
been unobservable to us. By using this approach, we can
identify the effect of scarcity disclosure using within-SKU
variability in scarcity disclosure and generate results that
are independent of any potential sampling bias.
3.2 | Descriptive statistics
Table 1 presents the descriptive statistics from the panel
we used to estimate the effect of posting inventory scarcity
messages on daily sales. Associated with each SKU, the
measurement for daily sales corresponds to the number of
units sold (including zero units sold over “non-OOS” days)
on any given day according to the selling price during that
day. As shown in Table 1, we collect sales measurements
for each SKU (daily sales) as part of each daily observa-
tion, along with the values for price, inventory level, and
scarcity message (defined above), over the 18-month
period, resulting in 27,044 SKU-day observations.
Among the statistics reported in Table 1, the average
of daily sales is 0.77 units with a standard deviation of
PARK ET AL.
4.80. The magnitude of the standard deviation provides
an indication of the variability that exists in daily sales
across SKUs. Moreover, the average and standard devia-
tion for price in Table 1 (383.50 and 330.83, respectively)
provide evidence of the existence of high variability
among the SKUs in the sample. Finally, Table 1 reports
the values of the variables' Pearson correlation coeffi-
cients. We find that the highest correlation coefficient
(in absolute value) is between scarcity message and
inventory level (−0.370). Thus, our analysis using these
variables is unlikely to be subject to multicollinearity
problems.1
4 | S T A T I S T I C A L MO D E L S AN D
RESULTS
To estimate the demand effect of the inventory scarcity
messages on daily sales, we first used a “naïve” statistical
modeling approach that makes no attempt to control for
unobserved demand shocks that may make the disclosure
of scarcity messages endogenous with respect to the
dependent variable. We then used a regression disconti-
nuity design (RDD) approach to address the issue of
endogeneity as well as to allow for heterogeneity in the
demand effects of scarcity messages as a function of dif-
ferences in inherent sales patterns across SKUs. We pre-
sent the results obtained from the naïve statistical
modeling approach in Section 4.1 and the results from
the RDD approach in Sections 4.2 and 4.3.
4.1 | Naïve modeling approach
Our initial analysis is based on the regression model as
stated in Equation (1) below
X TABLE 2
lnðSalesid + 1Þ = αi + β I ðd∈mÞ + γSMid
m m ð1Þ
+ δlnðPid Þ + εid :
In our model, we index SKU i = 1, …, 199 and the
index d = 1, …, Di denote different calendar days. To cap-
ture the effect associated with different months m = 1,…,
M (including seasonal effects), we introduce an indicator
variable, I, so that I (d ∈m) equals 1 if the day of the sales
d occurs in month m or 0, otherwise. Salesid represents
the sales (in units) of SKU i on day d. Because the log of
zero is undefined, we add a value of 1 to all Salesid values
on the left-hand side of Equation (1).
On the right-hand side of Equation (1), Pid denotes
the unit sales price of SKU i on day d. Next, the variable
SMid corresponds to a scarcity message dummy variable.
7
SMid equals 1 if BT had the scarcity message for SKU i on
display on day d. Otherwise, SMid equals zero. Observe
that the scarcity message dummy variable, SM, enables
us to distinguish the purchasing behavior “before” and
“after” BT posted its scarcity messages. Thus, the
corresponding coefficient γ seeks to capture the demand
effect as a function of the impact of scarcity messages on
daily sales. The term αi captures SKU-specific heteroge-
neity in daily sales. Also, βm captures the month effect in
daily sales. In turn, εid corresponds to idiosyncratic ran-
dom shock variables with mean zero. This variable cap-
tures unobserved factors influencing daily sales.
To estimate Equation (1), we first used a fixed effect
dummy least square estimator. It is well known that this
estimation approach is consistent and efficient. It also
uses fewer assumptions compared to the random effect
estimators approach (c.f., Chapter 10 in Wooldridge
(2010)). Moreover, it is consistent under potential selec-
tion or endogeneity problems caused by correlations
between αi and other explanatory variables (i.e., Pid and
SMid). In Equation (1), unobserved SKU-specific charac-
teristics are captured by αi. As we mentioned before, by
estimating this parameter using a fixed effect approach in
our regression model, we circumvent potential empirical
problems due to selection issues.
Table 2 reports our estimation results of Equation (1).
We omit the estimates of αi's and βm's to conserve space.
Please note that we evaluate the robustness of these
results in the Appendix B using alternative modeling
forms and specifications while still making no attempt to
control for unobserved demand shocks that may make
the disclosure of scarcity messages endogenous with
respect to the dependent variable.2 The results from these
alternative models are consistent with those presented in
Baseline estimation results for Equation (1)
Fixed effect dummy least square
Dependent var.: ln(Sales+1)
Parameter Estimate SE t-val.
Price for sales (δ) −0.032** 0.014 −2.276
Scarcity message (γ) −0.158*** 0.009 −17.671
SKU fixed effect (αi) Yes
Month fixed effect (βm) Yes
F statistic 24.360***
R-squared 0.149
Adj. R-squared 0.142
Number of observations 27,044
Note: Clustered standard errors are used.
**Significance at 5%, ***significance at 1%.
8 PARK ET AL.
Table 2. Observe from Table 2 that the estimated coeffi-
cient of price effects (δ) is negative and significant in daily
sales in Equation (1). As expected, this result confirms
that decreases in price have overall favorable effects on
daily sales, that is, lower prices will increase daily sales.
Furthermore, the estimated coefficient of the scarcity
message effect (γ) indicates that this message's disclosure
has a negative and significant effect on daily sales. Based
on the estimated γ coefficient in Equation (1), γ = −.158
and p < .01, daily sales are lower by 15.80% “after” BT
posted the scarcity message than “before.” Hence, these
results support Hypothesis 2.
4.2 | RDD modeling approach
Because BT posts the inventory message (“5 or less left in
stock”) when inventory for an SKU drops below 6 units,
SMid can be correlated with unobserved demand shocks,
which are included in the random shock variable εid. This
may generate endogeneity biases in our model estima-
tion. The demand shocks resulting in the correlation
between SMid and εid can be decomposed into (a) time-
invariant shocks (e.g., general popularity of an SKU,
which does not vary over time) and (b) time-varying
shocks (e.g., temporal popularity of an SKU due to sea-
sonal needs or censoring effects caused by variations in
inventory levels over time). Time-invariant shocks can be
handled by using a “fixed effect” approach. Specifically,
this approach incorporates the time-invariant shocks into
αi and estimates αi by treating them as model parameters.
Note that we use a fixed effect approach in our model
estimations and thus we circumvent this problem. A
more challenging issue is the potential correlation
between time-varying shocks and SMid. We tackle this
issue by using a RDD approach.
RDD is a quasi-experimental design approach that
allows for the estimation of the causal effects of the inter-
vention (the posting of a scarcity message in our case)
using the discrete nature of the threshold of the interven-
tion. RDD allows for an estimation of the causal effect
when the treatment is assigned only at or below
(or above) a cutoff value of a known variable. The litera-
ture refers to this variable as the “forcing variable.” In our
case, this variable corresponds to the inventory level and
its cutoff value is 5 units, the threshold BT used to dis-
close its scarcity message. Since BT kept this threshold
constant for all SKUs during our entire period of analysis,
the value of our key predictor, SMid, changes abruptly at
the threshold independently of time and SKU. Thus,
time-varying shocks lying closely on either side of the
threshold are comparable independently of the time and
the SKU. By using RDD, we exploit this condition to
estimate SMid's causal effects on Salesid through a com-
parison of the values of this dependent variable on either
side of the threshold (Angrist & Pischke, 2008).
Ho, Lim, Reza, and Xia (2017) provide a nice descrip-
tion of the RDD approach and they support RDD as a
method to tackle endogeneity and make causal infer-
ences when performing empirical research in
OM. Recently, a few scholars have used RDD to address
research questions in OM as well. For instance, Ander-
son, Dobkin, and Gross (2012) exploited a sharp change
in insurance coverage rates that results from young
adults “aging out” of their parents' insurance plans and
used RDD to estimate the effect of insurance coverage on
the utilization of emergency and inpatient health care
services. Following Anderson et al. (2012), we use a para-
metric linear spline estimator for our RDD analysis. This
approach is preferable over nonparametric methods,
which are sensitive to bandwidth selection and require a
large number of observations. Additional evaluations of
our RDD analysis are included in Appendix C.
Our RDD analysis is based on the following model
specification as stated in Equation (2).
X
lnðSalesid + 1Þ = αi + β I ðd∈mÞ + γSMid
m m
ð2Þ
+ δlnðPid Þ + θðInvid −τÞ
+ ρðInvid −τÞSMid + εid ,
where Invid denotes the inventory level for SKU
i observed on day d and τ represents the prespecified
threshold value (i.e., 5 units). Note that SMid equals 1 if
Invid ≤ τ or zero; otherwise.
An advantage of using the RDD analysis is that we
can disentangle the demand effect attributed to SMid
from time-varying effects between Invid and Salesid
induced by unobserved confounders, including temporal
variations in SKUs' demand due to consumers' seasonal
needs. In this case, while the parameter γ in Equation (2)
measures the demand effect on Salesid by the disclosure
of the scarcity message, the parameter θ captures the
time-varying effects between Invid and Salesid, induced
by these unobserved confounders. Finally, note that
Equation (2) allows SMid's causal effect on Salesid to vary
with respect to Invid by including an interaction term
between (Invid – τ) and SMid. The value of the ρ coeffi-
cient estimated for this interaction term will capture the
magnitude of this variation, which can be attributed to
censoring effects caused by changes in inventory level
once scarcity messages are disclosed.
Panel A in Table 3 reports the estimation results of
Equation (2). The statistically significant value estimated
for the SMid coefficient (γ) indicates that the disclosure of
the scarcity message decreases daily sales for an SKU by
PARK ET AL. 9

TABLE 3 Estimation results using regression discontinuity design

Panel A Panel B

Dependent var.: ln(Sales+1) Dependent var.: ln(Sales+1)

Parameter Estimate SE t-val. Estimate SE t-val.

Price for sales (δ) −0.032** 0.014 −2.284 — — —
Scarcity message (γ) −0.176*** 0.016 −11.208 −0.176*** 0.016 −11.174
θ 0.000 0.000 −1.471 0.000 0.000 −1.448
ρ −0.006 0.005 −1.057 −0.006 0.005 −1.070
SKU fixed effect (αi) Yes Yes
Month fixed effect (βm) Yes Yes
F statistic 22.300*** 23.070***
R-square 0.149 0.149
Adj. R-square 0.142 0.142
Number of observations 27,044 27,044
Panel C Panel D

Dependent car.: Sales Dependent car.: Sales

Parameter Estimate SE t-val. Estimate SE t-val.

Price for sales (δ) −0.247** 0.120 −2.051 — — —
Scarcity message (γ) −0.513*** 0.137 −3.753 −0.509*** 0.137 −3.722
θ −0.001 0.001 −1.519 −0.001 0.001 −1.499
ρ 0.025 0.045 0.558 0.025 0.045 0.547
SKU fixed effect (αi) Yes Yes
Month fixed effect (βm) Yes Yes
F statistic 7.978*** 7.995***
R-square 0.057 0.057
Adj. R-square 0.050 0.050
Number of observations 27,044 27,044

Note: Clustered std. errors are used.

**Significance at 5%, ***significance at 1%.

an average of 17.60%. Overall, the estimated value of this
coefficient echoes our findings using Equation (1),
reported in Table 2, and provides further support for
Hypothesis 2. In addition, the estimated coefficient of
price effect is significantly negative (δ= −0.030). This
result is consistent with those in Section 4.1. They suggest
that a 1% decrease in price leads to a 3.20% increase in
daily sales. Therefore, daily sales are highly sensitive to
variations in product prices.
Note also that the results we obtained are consistent
with those obtained using the same specification and
RDD modeling form but excluding all SKUs with
extended OOS observations to account for biases due to
potentially unobserved heterogeneity in service levels
across the products (please refer to Appendix D). Fur-
thermore, the results in Panels B, C, and D in Table 3
add robustness to our findings using alternative specifi-
cations within the RDD approach. First, we drop price
(Pid) from the model (in Panel B). We then use in Panel
C an alternative dependent variable's specification,
based on a level (i.e., direct measurement) variable
instead of log-transformed one. Finally, in Panel D, we
use the same alternative dependent variable specifica-
tion as in Panel C and the same set of regressors in
Panel B. The results from these alternative specifica-
tions are consistent with those in Panel A and with
those in Table 2.
In sum, the consistency in the results obtained across
the different RDD specifications in Table 3 as well as in
the results in Table 2 provides support for Hypothesis
2. These results point to significantly negative effects by
the disclosure of scarcity messages on daily sales.
10 PARK ET AL.

4.3 | Heterogeneity effects of scarcity T A B L E 4 Estimation results using regression discontinuity

message disclosures design interaction models

Dependent var.: ln(Sales+1)

We conclude our analysis with an evaluation of varia-
tions in demand effects induced by the disclosure of scar- Parameters Estimate SE t-val.
city messages across products based on their inherent Price for sales (δ) −0.029** 0.014 −2.065
daily sales (as a function of the amount of units sold per Scarcity message
day—high versus low quantities). For this analysis, we γ0 −0.031 0.021 −1.498
chose to use the same RDD discussed in Section 4.2 to
γS −0.159*** 0.015 −10.513
account for potential correlations between SMid and
θ −0.0003*** 0.0001 −3.193
unobserved demand shocks included in εid and to be able
to disentangle and estimate the demand effect. We pre- ρ −0.011** 0.005 −2.009
sent the specifications for this design in Equation (3) SKU fixed effect (αi) Yes
followed by the estimation results. Month fixed effect (βm) Yes
Equation (3) incorporates the scarcity message effect F statistic 23.512***
varying with SKU average daily sales (ASi):
R-square 0.152
X Adj. R-square 0.145
lnðSalesid + 1Þ = αi + β I ðd∈mÞ + ðγ 0
m m
+ γ S lnðASi ÞÞSMid
Number of observations 27,044
+ δlnðPid Þ + θðInvid − τÞ
+ ρ ðInvid − τÞSMid + εid , Note: Clustered standard errors are used.
**Significance at 5%, ***significance at 1%.
ð3Þ

where ASi denotes the average daily sales of SKU i. ASi
represents, on average, the daily sales of SKU i (Among all
SKUs, the average daily sales is 2.69 units and the standard
deviation is 1.88). In Equation (3), we allow the effect of
scarcity message to vary with the logged value of ASi. The
results we present in this section are based on this specifi-
cation. However, note that we also verified that these
results were consistent with those obtained using similar
specifications to that in Equation (1) and can provide those
results upon request. Moreover, in Appendix E, we present
supplementary results obtained from a robustness test
using a specification with categorical values (high = 1 and
low = 0) for ln(ASi) based on median splits. These results
are consistent with those below.
Table 4 reports the estimation results of Equation (3).
The value estimated for the price coefficient (δ= −.029,
p value <.01) is consistent with those estimated in Sections
4.1 and 4.2. Hence, we can conclude that daily sales tend
to increase with drops in prices: a 1% decrease in price can
lead to an increase of almost 3% in daily sales. The esti-
mated values for the γ 0 and γ s coefficients indicate that the
demand effect induced by scarcity disclosures has a nega-
tive effect on SKUs' daily sales contingent on the SKUs'
average number of units sold per day. As average daily
sales increase, the demand effect will become increasingly
more negative. For instance, if an SKU's average daily
sales is 2.69 units, its daily sales will decrease by 15.73%
(=ln(ASi) • γ S) = ln(2.69) * (−0.159)) due to the demand
effect induced by the disclosure of scarcity messages. As
SKUs' average daily sales expand, the negative effect by
the disclosure of scarcity messages will become more
acute. According to the 0.159 value estimated for the γ s
coefficient, a 1% increase in average daily sales expands by
15.90% the negative effect caused by the disclosure of scar-
city messages on sales.
Finally, we consider the indirect effect of inventory
levels associated with the impact of scarcity messages on
daily sales. This indirect effect is evidenced when inven-
tory is below τ so that (Invid − τ) < 0 and SMid = 1 in
Equation (3). In this case, because the estimated θ and
ρ coefficients are −0.0003 and −0.011, the term θ 
(Invid − τ) + ρ  (Invid − τ) is positive. Hence daily sales
increase for SKUs at increasingly lower inventory levels.
However, this increase is offset by the direct impact of
scarcity messages on daily sales through γ S and γ 0, as dis-
cussed above, since γ S and γ 0 are much higher than θ and
ρ. Therefore, the overall impact of scarcity messages is
negative: these messages' disclosure can cause daily sales
to decrease in general.
5 | S E N S I T I V I T Y AN A L Y S I S
The results in Table 4 provide evidence of a significant
SKU-wide heterogeneity in the demand effect induced by
the disclosure of scarcity messages. In this section, we
exploit this heterogeneity to conduct a sensitivity analysis
regarding our results' support for Hypothesis 2 and iden-
tify boundary conditions for the demand effect across
SKUs' average daily sales (ASi).
PARK ET AL.
From the results in Table 4, we determined that all
SKUs with ASi values greater than 1.30 units/day will
experience decreases in daily sales due to the disclosure
of scarcity messages. In total, 91% of SKUs in our sample
have ASi values that exceed this lower bound. To obtain
this benchmark, we let ln(Salesid + 1) = 0 and solve for
ASi in Equation (3), while controlling for SKU and time
fixed effects. Note that as part of this estimation, we set
to zero the γ 0 coefficient in Equation (3), estimated to be
nonstatistically different from zero in Table 4. We also
assumed Pid = $19.99 (the lowest price in the panel) and
Invid = 1 (and thus Invid – τ = −4 and SMid = 1).
The value chosen for Invid generates conservative esti-
mates of ASi's lower-bound benchmark necessary for
SKUs to be susceptible to the negative effects described
in Hypothesis 2. Higher values of Invid will decrease this
lower bound, thereby increasing the percentage of sam-
pled SKUs susceptible to the effects in Hypothesis 2. On
the other hand, higher Pid values will increase the ASi
lower-bound value. Using the maximum value for Pid in
the sample ($3,075) increases the ASi lower bound value
to 3.25 units. Therefore, low-value SKUs are susceptible
to decreases in daily sales due to the disclosure of scarcity
messages when daily sales are at least 1.30 units while
high-value SKUs are susceptible to these effects when
their daily sales are above 3.25 units.
One additional consideration is that, regardless of the
value of the SKUs, discounts can increase daily sales.
According to our results, a reduction of 1% in SKU price
will increase daily sales by almost 3%, on average (please
refer to the value estimated for the price coefficient,
δ = .029, in Table 4). Because this effect is independent of
the disclosure of scarcity messages and of the SKUs' aver-
age daily sales, it carries greater weight in increasing
daily sales for faster moving SKUs (with ASi greater than
the minimum of 1.23 units/day), which are the items in
the assortment exposed to the most severe negative
effects by scarcity disclosure on daily sales.
Moreover, the price effect estimated in our analysis sug-
gests that daily sales are highly  price elastic—daily
 sales'
price elasticity equals −2.90 −2:90 = −0:01 0:029
, on average.
This elasticity exceeds that observed for the effects caused
by reductions of ASi, on the link between scarcity disclo-
sure and daily sales—as estimated based on the γ s coeffi-
cient for ln(AS) • SM in Table 4 (γ s = −.159). For an SKU
with an average ASi, (2.69 units), a unit decrease in ASi
corresponds to a decrease of 37.17%. In turn, according to
the value estimated for γ s, this reduction will ameliorate
the adverse
 impact by scarcity  disclosure on daily sales by
4.80% eðγ S *lnð2:69Þ − γS *lnð1:69Þ Þ . When we compare this
effect against the percentage decrease in ASi responsible
for it (37.17%), we see that it only amounts to a fraction
 4:80
− 37:17 = −0:13 of the decrease in ASi. Although this
11
ratio will rise for SKUs with ASi values increasingly
above their sample average, it will only match the ratio
estimated for price elasticity in daily sales (−2.90) at very
high levels of ASi (62.50). Thus, based on the estimated
price elasticity for daily sales, price discounts are rela-
tively more effective at offsetting the negative effect on
daily sales induced by scarcity messages' disclosure than
reductions in ASi across a wide range of SKUs are.
6 | CONCLUSION
In this article, we have examined the impact that posting
scarcity messages online has on daily sales. To that end,
we focused on an online retailer selling durable goods to
consumers over multiple inventory replenishment cycles,
without restrictions as to the amount of time these prod-
ucts are available for sale. By focusing on this particular
setting, we were able to obtain insights that are generaliz-
able to markets in which retailers sell consumer goods for
which demand will vary depending on consumers' needs.
Our results showed that the disclosure of inventory
upper bound information via these scarcity messages
decreases SKUs' daily sales quantities. On average, the dis-
closure of scarcity messages decreases these amounts by
17.60%, after controlling for SKU fixed effects. However,
when we partialed out moderation effects by SKUs' average
daily sales quantities, we found that this effect is more
pronounced for items that are sold in greater quantities
per day. Furthermore, our analysis revealed that, price
discounts are particularly effective in offsetting the
negative effect on daily sales induced by scarcity messages'
disclosure.
Together, these findings provide boundary conditions
to the effects on sales caused by the disclosure of inven-
tory information as well as price discounts to consumers
when selling durable goods online. It is evident from
these conditions that sales reactions to stimuli conveyed
by the disclosure of scarcity messages are nontrivial and
that these reactions are contingent on SKUs' daily sale
amounts and prices. An indiscriminate implementation
of scarcity disclosure strategies across products will lead
to suboptimal results. To be effective in increasing daily
sales, these strategies must focus on SKUs that are
marketed by retailers at highly competitive prices as well
as on items that sell in small daily amounts. These find-
ings offer clear practical implications for retailers when
considering how to stimulate sales through a combina-
tion of SKU scarcity signals and prices.
Our results also provide several implications for
researchers who are interested in expanding on our
study. Additional research may focus on product catego-
ries different from those considered in our analysis.
12
Studies involving home improvement products such as
those sold by retailers like Lowe's or Home Depot may
offer additional insights into the role of scarcity messages
in shaping demand for SKUs typically purchased by con-
sumers in larger sets. It is possible that the adverse
impact by scarcity messages on daily sales we observed
will be more prominent in these settings.
Another opportunity for future research is the evalua-
tion of alternative inventory thresholds for the disclosure
of scarcity messages. This would provide retailers with an
understanding of the optimal threshold policy they
should use for the disclosure of scarcity messages.
Thresholds may vary as a function of SKUs' average daily
sales and prices. An additional research avenue may
involve an evaluation of the impact of price competition
among retailers on the effectiveness of scarcity disclosure
in influencing demand across SKUs. This is a particularly
relevant issue for retailers operating online under slim
price margins. It is possible that demand for SKUs under
these conditions may not be as sensitive to the disclosure
of scarcity messages. Moreover, future work may con-
sider the availability of SKUs in online and offline chan-
nels operated by the same retailer as part of the
evaluation of scarcity disclosure strategies online. Our
research focused on a sample of SKUs offered only
online. However, it is possible that expanding the sample
to include SKUs offered online as well as at brick and
mortar stores will show variations in the effect of scarcity
messages on demand.
Finally, future research may consider evaluating the
effect of scarcity disclosure on SKUs' purchasing rates as
measured by the time intervals between SKU purchases
before versus after disclosure. Although our analysis of
the effect of scarcity disclosure on daily sales provides an
account of this effect on overall demand, this proposed
research extension may show how variations in inter-
purchase time contribute to the changes we observed in
daily sales. Evaluating the effect of scarcity disclosure on
purchasing rates requires a very high data collection fre-
quency to guarantee that no multiple purchases are mis-
takenly bundled in the same record (such that two
purchases of one unit each are not mistaken by a single
purchase of 2 units, for example). The data collection fre-
quency in our study is not high enough to offer this guar-
antee. We attempted to overcome this limitation by using
simulated interpurchase times in instances when errone-
ous bundling of purchases was a possibility. The results
are available in a prior version of this article at https://
doi.org/10.2139/ssrn.3447624.
ORCID
Elliot Rabinovich https://orcid.org/0000-0001-7251-
9571
PARK ET AL.
ENDN OTE S
1
In the empirical analyses, we use log-transformed variables of
sales and price. When we use these transformed variables, the cor-
relation coefficients show marginal changes and the highest cor-
relation coefficient is still −0.370.
2
Specifically, we considered the following alternative model speci-
fications for the robustness checks: (1) a linear model with an
unlogged dependent variable, (2) a Poisson regression model,
(3) a Negative binomial regression model, and (4) a Zero-inflated
Negative binomial regression model.
RE FER EN CES
Anderson, M., Dobkin, C., & Gross, T. (2012). The effect of health
insurance coverage on the use of medical services. American
Economic Journal: Economic Policy, 4(1), 1–27.
Angrist, J. D., & Pischke, J. S. (2008). Mostly harmless econometrics: An
empiricist's companion. Princeton, NJ: Princeton University Press.
Aviv, Y., Tang, C. S., & Yin, R. (2009). Mitigating the adverse
impact of strategic waiting in dynamic pricing settings: A study
of two sales mechanisms. In S. Netessine & C. S. Tang (Eds.),
Consumer-driven demand and operations management models
(pp. 353–370). New York, NY: Springer.
Bakos, J. Y. (1997). Reducing buyer search costs: Implications for
electronic marketplaces. Management Science, 43(12), 1676–1692.
Balakrishnan, A., Pangburn, M. S., & Stavrulaki, E. (2004). Stack
them high and let them fly': Lot-sizing policies when invento-
ries stimulate demand. Management Science, 50(5), 630–644.
Balakrishnan, A., Pangburn, M. S., & Stavrulaki, E. (2008). Integrating
the promotional and service roles of retail inventories. Manufactur-
ing and Service Operations Management, 10(2), 218–235.
Boada-Collado, P., & Martinez-de-Albeniz, V. (2019). Estimating
and optimizing the impact of inventory on consumer choices in
a fashion retail setting. Manufacturing and Service Operations
Management (Forthcoming). https://doi.org/10.1287/msom.
2018.0764
Boyer, K. K., Hallowell, R., & Roth, A. V. (2002). E-services: Operating
strategy—A case study and a method for analyzing operational
benefits. Journal of Operations Management, 20(2), 175–188.
Brock, T. C. (1968). Implications of commodity theory for value
change. In A. G. Greenwald, T. C. Brock, & T. M. Ostrom
(Eds.), Psychological foundations of attitudes (pp. 243–275).
New York, NY: Academic Press.
Brynjolfsson, E., & Smith, M. D. (2000). Frictionless commerce? A
comparison of internet and conventional retailers. Management
Science, 46(4), 563–585.
Cachon, G. P., Gallino, S., & Olivares, M. (2018). Does
adding inventory increase sales? Evidence of a scarcity effect
in U.S. automobile dealerships. Management Science, 65(4),
1469–1485.
Chevalier, J., & Goolsbee, A. (2003). Measuring prices and price
competition online: Amazon.com and BarnesandNoble.com.
Quantitative Marketing and Economics, 1(2), 203–222.
Cui, R., & Shin, H. (2017). Sharing aggregate inventory information
with customers: Strategic cross-selling and shortage reduction.
Management Science, 64(1), 381–400.
Cui, R., Zhang, D., & Bassamboo, A. (2018). Learning from inven-
tory availability information: Evidence from field experiments
on Amazon. Management Science, 65(3), 1216–1235.
PARK ET AL.
DeGraba, P. (1995). Buying frenzies and seller-induced excess
demand. The Rand Journal of Economics, 26(2), 331–342.
Ferreira, K., Lee, B. H., & Simchi-Levi, D. (2016). Analytics for an
online retailer: Demand forecasting and price optimization.
Manufacturing & Service Operations Management, 18(1), 69–88.
Fisher, M., Gallino, S., & Li, J. (2017). Competition-based dynamic
pricing in online retailing: A methodology validated with field
experiments. Management Science, 64(6), 2496–2514.
Greene, W. H. (2003). Econometric analysis. Pearson Education,
Upper Saddle River, NJ.
Ho, T.-H., Lim, N., Reza, S., & Xia, X. (2017). OM forum: Causal
inference models in operations management. Manufacturing &
Service Operations Management, 19(4), 509–525.
Jerath, K., Netessine, S., & Veeraraghavan, S. K. (2010). Revenue
management with strategic customers: Last minute selling and
opaque selling. Management Science, 56(3), 430–448.
Koschat, M. A. (2008). Store inventory can affect demand: Empiri-
cal evidence from magazine re-tailing. Journal of Retailing, 84
(2), 165–179.
Lee, D. S., & Lemieux, T. (2010). Regression discontinuity designs
in economics. Journal of Economic Literature, 48(2), 281–355.
Lynn, M. (1991). Scarcity effects on value: A quantitative review of
the commodity theory literature. Psychology & Marketing, 8(1),
43–57.
Netessine, S., & Tang, C. S. (2009). Consumer-driven demand
and operations management models: A systematic study of
information-technology-enabled sales mechanisms. New York,
NY: Springer.
Olson, J. R., Belohlav, J. A., & Boyer, K. K. (2005). Operational, eco-
nomic and mission elements in not-for-profit organizations:
The case of the Chicago Symphony Orchestra. Journal of Oper-
ations Management, 23(2), 125–142.
Olson, J. R., & Boyer, K. K. (2003). Factors influencing the utiliza-
tion of Internet purchasing in small organizations. Journal of
Operations Management, 21(2), 225–245.
Rabinovich, E., Sinha, R., & Laseter, T. (2011). Unlimited shelf
space in Internet supply chains: Treasure trove or wasteland?
Journal of Operations Management, 29(4), 305–317.
Rao, S., Griffis, S. E., & Goldsby, T. J. (2011). Failure to deliver?
Linking online order fulfillment glitches with future purchase
behavior. Journal of Operations Management, 29(7–8), 692–703.
Rao, S., Rabinovich, E., & Raju, D. (2014). The role of physical dis-
tribution services as determinants of product returns in Inter-
net retailing. Journal of Operations Management, 32(6),
295–312.
Rosenzweig, E. D., Laseter, T. M., & Roth, A. V. (2011). Through
the service operations strategy looking glass: Influence of
industrial sector, ownership, and service offerings on B2B e-
marketplace failures. Journal of Operations Management, 29
(1–2), 33–48.
Smith, M. D., & Brynjolfsson, E. (2001). Customer decision making
at an Internet shopbot: Brand still matters. Journal of Industrial
Economics, 49(4), 541–558.
Sodero, A., & Rabinovich, E. (2017). Demand and revenue manage-
ment of deteriorating inventory on the Internet: An empirical
study of flash sales markets. Journal of Business Logistics, 38(3),
170–183.
Sodero, A., Rabinovich, E., Aydinliyim, T., & Pangburn, M. S.
(2017). An empirical analysis of how inventory levels and prices
13
affect online retail sales. SSRN Electronic Journal. https://doi.
org/10.2139/ssrn.2872938
Urban, T. L. (2005). Inventory models with inventory-level-
dependent demand: A comprehensive review and unifying the-
ory. European Journal of Operational Research, 162(3), 792–804.
Wagner, L., Calvo, E., & Cui, R. (2018). The value of disclosing
product availability on retail platforms. SSRN Electronic Jour-
nal. https://doi.org/10.2139/ssrn.3195047
Wolfe, H. B. (1968). A model for control of style merchandise.
Industrial Management Review, 9(2), 69–82.
Wooldridge, J. M. (2010). Econometric analysis of cross section and
panel data (2nd ed.). Cambridge, MA: The MIT Press.
Zhang, J., Fang, X., & Sheng, O. (2006). Online consumer search
depth: Theories and new findings. Journal of Management
Information Systems, 23(3), 71–95.
How to cite this article: Park S, Rabinovich E,
Tang CS, Yin R. The impact of disclosing
inventory-scarcity messages on sales in online
retailing. J Oper Manag. 2020;1–19. https://doi.org/
10.1002/joom.1082
APPENDIX A: METHODOLOGICAL
VAL I DI TY
To measure sales for each SKU, we estimated the daily
magnitudes (in units) associated with the inventory
reductions that Cartbound registered in the source code
on BT's SKU pages. To ensure the validity of this method-
ology in producing reliable sales measures, we first veri-
fied that BT's inventory information in its source code
reflected the number of units of SKUs consumers pur-
chased in real time. Our verification is based on the fol-
lowing experiment.
First, we sampled five SKUs across the categories in
Figure 2. We then visited the webpage of each SKU and
pretended to purchase the SKU by increasing the pur-
chase quantity in the shopping cart one unit at a time
until receiving notice that the amount of units in the cart
exceeded the inventory level in BT's source code. We
obtained the same outcome after repeating this routine
for all SKUs in the sample. That is, once the total number
of units added to the cart exceeded the inventory level in
the source code for each SKU, we received immediate
notification that BT did not have enough inventory to ful-
fill the order. Based on this evidence, we infer that
consumers' purchasing decisions and BT's inventory
information in its source code are linked in real time.
Table A1 lists these SKUs' URLs and the inventory levels
in the source code.
14 PARK ET AL.

TABLE A1 SKUs sampled to test for inventory updates following consumers' purchasing decisions

Inventory
SKU URL level
https://www.bonton.com/home/kitchen/small-appliances/nuwave-6qt-digital-air-fryer-black-652185370012/ 5 units
https://www.bonton.com/bed-bath/abyss-habidecor-medium-reversible-cotton-bath-rug-30309735 3 units
900000/
https://www.bonton.com/bed-bath/waterworks-sahara-cotton-linen-bath-rug-30309030560000/ 2 units
https://www.bonton.com/travel-luggage/suitcases/victorinox-swiss-army-avolve-20in-expandable-wheeled- 2 units
case-10409892920000/
https://www.bonton.com/home/storage-organization/baskets-hampers/neatnix-set-of-4-boxes-3010435728/ 4 units

In addition, we evaluated whether the frequency that
Cartbound used to crawl the source code for each SKU
page was sufficiently high to ensure that the inventory
reductions registered were contemporaneous to the num-
ber of units sold for the SKUs every day. To monitor the
SKU pages, Cartbound used Web crawlers that were avail-
able continuously and queried BT's SKU pages based on
the requests they received from Cartbound's users. From
these queries, we registered a daily average of 2.94 page
crawls per SKU (SD = 1.33). Moreover, we registered an
average of at least one page crawl per day for 99.14% of
the intervals between consecutive changes in inventory or
price during our observation period. The number of units
sold during these intervals represents 99.28% of the total
in the entire observation period. Finally, we verified
whether the lengths of the intervals and the magnitude in
inventory drops registered during the intervals were asso-
ciated with low page crawl rates. To that end, we esti-
mated the correlation coefficients between the average
number of daily page crawls during each interval and the
length and magnitude in the inventory drop during the
interval. Since the values we obtained for these coeffi-
cients were near zero (−0.048 and −0.046, respectively),
low crawl rates do not appear to be linked significantly to
long interval durations or large inventory drops.
Based on this crawling frequency, we were able to
record inventory reductions in intervals that were highly
consistent with the daily unit of measurement we chose
for (daily) sales. This enabled us to register inventory
drops in time intervals as low as 1 day or less for 174 out
of 199 SKUs in our sample. For the remaining 25 SKUs,
we registered inventory drops in intervals greater than or
equal to 2 days. The reason we did not register inventory
drops at shorter time intervals for these 25 SKUs is likely
due to the fact that these SKUs are “slow moving items”
relative to other 174 SKUs in the sample: the average
daily sales for these 25 SKUs was 35% lower than the
other 174 SKUs. Moreover, this difference in daily sales
rates between the two groups of SKUs existed despite the
fact that the crawling frequency across both groups
did not differ statistically. While the daily average cra-
wling count among the group of 174 SKUs was 3.05,
CI0.99 = [2.84, 3.27], the average among the other 25 SKUs
was 2.45, CI0.99 = [1.95, 2.94].
Although all available evidence suggests that the
inventory reductions we registered for each SKU in the
sample are contemporaneous to the number of units sold
every day, we conducted two additional tests on the
robustness of the results reported in the article. We
describe these tests as follows.
In the first test, we removed from the sample those
25 SKUs that registered no inventory drops in intervals
lower than or equal to 1 day and then re-estimated the
article's RDD model. The goal of the test is to determine
whether the removal of these items from the sample
uncovers biases in the article's estimation of the demand
effect by the disclosure of scarcity messages on daily sales.
The results obtained from the test failed to find statistical
evidence of these biases. Specifically, the values of the γ
coefficient estimated in the article (as shown in Table 3) as
well as in this robustness test under a logged or an
unlogged dependent variable (γ= −.195, p value < .01, γ=
−.576, p value < .01 in Table A2, Panel A) are all negative
and statistically different from zero, suggesting that daily
sales decrease postscarcity disclosure.
In the second test, we retained all inventory drop
observations for all SKUs. However, we treated every
observation that led to a decrease in inventory from levels
above the scarcity message's disclosure threshold (of
5 units) to levels below the threshold as if the observation
had occurred “entirely after” scarcity disclosure. The goal
is to simulate a “shift” in the allocation of daily sales
from predisclosure to postdisclosure in order to challenge
directly the RDD estimation results in the article pointing
to the existence of lower daily sales postdisclosure.
Table A2 (Panel B) presents the results from this test
based on our simulated data. They show that the value
obtained for γ is negative and statistically different from
zero when we use either logged or unlogged dependent
variables, which is consistent with the values obtained
PARK ET AL. 15

TABLE A2 Robustness checks for

Dependent var.: ln(Sales+1) Dependent var.: Sales
scarcity disclosure's demand effect on Panel A
daily sales Parameter Estimate SE t-val. Estimate SE t-val.
Ln(Price) (δ) −0.028* 0.014 −1.89 −0.190 0.128 −1.48
Scarcity message (γ) −0.195*** 0.017 −11.29 −0.576*** 0.147 −3.89
θ 0.000 0.000 −0.49 −0.001 0.000 −1.62
ρ −0.010* 0.005 −1.74 0.020 0.050 0.40
SKU fixed effect (αi) Yes Yes
Month fixed effect (βm) Yes Yes
F statistic 19.75*** 6.24***
R-square 0.133 0.046
Adj. R-square 0.126 0.038
Number of observations 23,553 23,553
Dependent var.: In(Sales + 1) Dependent var.: Sales
Panel B
Parameter Estimate SE t-val. Estimate SE t-val.
Ln(Price) (δ) −0.032** 0.014 −2.310 −0.248** 0.120 −2.06
Scarcity message (γ) −0.164*** 0.013 −13.05 −0.464*** 0.109 −4.26
θ −0.0002** 0.0001 −2.035 −0.001 0.001 −1.64
ρ −0.001 0.004 0.387 0.047 0.033 1.43
SKU fixed effect (αi) Yes Yes
Month fixed effect (βm) Yes Yes
F statistic 23.086*** 7.986***
R-square 0.149 0.057
Adj. R-square 0.143 0.050
Number of observations 27,044 27,044

Note: Clustered std. errors are used.

*Significance at 10%, **significance at 5%, ***significance at 1%.

for γ in the article (Table 3). Given that the results from
these two tests continue to support those presented in the
article, we can conclude that our findings are robust:
daily sales postscarcity disclosure are lower than daily
sales predisclosure.
A P P EN D I X B : R ES U L T S F R O M
AL TE RN AT IVE MO D EL IN G
S PE CIF ICAT I O NS
We first evaluate the robustness of the results in
Section 4 by estimating the same model in Equation (1)
using different specifications for the dependent variable,
daily sales, instead of using a log transformation. As the
estimation results reported in Table B1 show, we find
consistent results regarding the price and the scarcity
message effects, adding validity to our findings.
Furthermore, we modeled daily sales as a count vari-
able using (1) a Poisson, (2) a Negative Binomial, and (3) a
Zero-Inflated Negative Binomial regression model. A
Poisson model is a generalized linear model of regression
analysis (Greene, 2003)—as shown in Equation (B1):
PrðSalesid = sjX id Þ = Poisson
 X  ðB1Þ
α+ m
β m  I ð d∈m Þ + γ  SM id + δ  ln ð P id Þ
where s denotes the number of units sold for SKU i on
day d (count). Equation (B1) assumes that daily sales are
based on a Poisson random variable with a rate associ-
ated with different covariates in Xid (e.g., SMid, Pid). Thus,
Equation (B1) states that the probability of observing s
follows the Poisson probability density function associ-
ated with those covariates in Xid (e.g., SMid, Pid). Here,
the estimated values exp(γ) and exp(δ) represent the
impact of scarcity messages and price on expected daily
sales, respectively.
The Poisson regression model has been criticized for
its restrictive property that the conditional variance
16 PARK ET AL.

TABLE B1 Robustness check using alternative model and ϑ is a vector of parameters. Since Φ(Zid  ϑ) should be
specification of Equation (1) a valid probability bounded between zero and one, we
specify a standard normal distribution function for Φ()
Fixed effect dummy least square
and use the same covariates as Xid for Zid.
Dependent var.: Sales We report maximum-likelihood estimation results
Parameter Estimate SE t-val. for the three count data models specified in Equa-
tions (B1)–(B3) in Table B2. From the Poisson regression
Price for sales (δ) −0.245** 0.120 −2.034
results, we find that both the effect of price and the effect
Scarcity message (γ) −0.531*** 0.078 −6.836
of scarcity message disclosure on daily sales are negative
SKU fixed effect (αi) Yes and statistically significant. This suggests that, relative to
Month Fixed Effect (βm) Yes baseline conditions with no scarcity messages (i.e., exp
F statistic 8.04*** (γ SMid) = exp (0) = 1), the disclosure of these messages
R-squared 0.06 can reduce expected daily sales shrink by 68% (exp
(γ SMid) = exp (−1.151) = 0.32). Similarly, when log-
Adj. R-squared 0.05
price (ln(Pid)) increases by a unit, daily sales decrease by
Number of observations 27,044
16% (exp (δ) = exp (−0.175) = 0.84).
Note: Clustered standard errors are used. From the negative binomial regression results, we find
**Significance at 5%, ***significance at 1%.
that both the effect of price and the effect of scarcity mes-
sage disclosure on daily sales are negative and statistically
equals the conditional mean (i.e., overdispersion prob- significant. This suggests that, relative to baseline condi-
lem). The negative binomial model tackles this problem tions with no scarcity messages, the disclosure of these
by introducing an unobserved heterogeneity term which messages can reduce expected daily sales by 69% (exp (γ
follows a gamma distribution. We estimate the following SMid) = exp (−1.173) = 0.31). Similarly, when log-price (ln
negative binomial regression model: (Pid)) increases by a unit, daily sales decrease by 11% (exp
(δ) = exp (−0.112) = 0.89). The gamma distribution param-
PrðSalesid 
= sjX id ,κ id Þ = κid eter η is highly significant and positive (8.541, p value
X 
 Poisson α + β  I ð d∈m Þ + γ  SM id + δ  ln ð P id Þ <.001). Note that when η converges to zero, the negative
m m
binomial regression model becomes a Poisson regression
ðB2Þ model. We also observe that, according to all model fit
  measures (log-likelihood, akaike's information criterion
where κid  gamma 1η , 1η distribution with E(κ id) = 1 (AIC), and bayesian information criterion (BIC)), the nega-
and V(κid) = η. Note κ id captures both cross-sectional and tive binomial model is preferable to the Poisson model. We
serial unobserved heterogeneity added to the Poisson can conclude that our daily sales data has substantial
regression part, adding flexibility to the model. unobserved heterogeneity and overdispersion and thus can
In addition to overdispersion and unobserved hetero- be better represented by a negative binomial model.
geneity, count data are often characterized by excess Next, from the zero-inflated negative binomial regres-
zeros. To additionally account for this, we consider the sion results, we find that both the effect of price and the
following zero-inflated negative binomial regression effect of scarcity message disclosure on daily sales are neg-
model: ative and statistically significant. When log-price (ln(Pid))

(
0 with probability ΦðZid  ϑÞ
Salesid  , ðB3Þ
Negative Binomial ðSalesid = sjXid Þ with probability 1 −ΦðZid  ϑÞ

where negative binomial(Salesid = s| Xid) represents the
negative binomial regression model specified in Equa-
tion (B3) and Φ(Zid  ϑ) is the zero inflation model which
captures the excessive zero observations. The zero inflation
model is specified as a function of observed covariates Zid
increases by a unit, daily sales decrease by 10% (exp
(δ) = exp(−0.103) = 0.90). Relative to baseline conditions
with no scarcity messages, the disclosure of these messages
can reduce expected daily sales by 28% (exp(γ SMid) = exp
(−0.324) = 0.72). Compared to the two previous model
PARK ET AL. 17

TABLE B2 Robustness check using count data models

Negative binomial Zero-inflated negative

Poisson regression regression binomial regression

Dependent var.: Sales Dependent var.: Sales Dependent var.: Sales

Parameter Est. SE t-val. Est. SE t-val. Est. SE t-val.

Price (δ) −0.175*** 0.010 −18.30 −0.112*** 0.028 −3.90 −0.103*** 0.030 −3.50
Scarcity message (γ) −1.151*** 0.022 −52.30 −1.173*** 0.046 −25.50 −0.324*** 0.074 −4.40
Gamma dist. Parameter (η) 8.541*** 0.159 53.70 7.478*** 0.148 50.60
Zero-inflation model-constant (ϑ0) −6.955*** 0.142 −49.10
Zero-inflation model-Price (ϑ1) 0.048 0.050 1.00
Zero-inflation model-scarcity message (ϑ2) 6.853*** 0.142 48.40
Month fixed effect Yes Yes Yes
Log-likelihood −54,959 −24,533 −24,378
AIC 109,956 49,105 48,801
BIC 110,112 49,269 48,990
Number of observations 27,044 27,044 27,044

**Significance at 5%, ***significance at 1%.

Abbreviations: AIC, akaike's information criterion; BIC, bayesian information criterion.

results, this value looks rather small. This is because the

scarcity message can influence daily sales through another
route—the zero-inflation process. The coefficient of scar-
city message in the zero-inflation model (ϑ2) is highly sig-
nificant and positive, indicating that the probability of
observing zero versus the negative binomial process (which
has a mean greater than zero) significantly increases with
scarcity messages. More specifically, at the average log
price (=5.68), the estimated value of the zero inflation
model is 0.56 (= Φ(Zid  ϑ) = Φ(−6.955 + 0.047*5.68
+ 6.853)) when the scarcity message is on, while this num-
ber shrinks to 0 when the message is off (0 = Φ(Zid  ϑ) =
Φ(−6.955 + 0.047*5.68)). Again, our estimation result con-
firms that the scarcity message has a negative impact on
daily sales through both a negative binomial process and a
zero inflation process. The gamma distribution parameter
η is highly significant and positive (7.478, p value <.001).
We also observe that the zero-inflated negative binomial
model is the most preferred among three models in terms
of three fit measures (log-likelihood, AIC, and BIC).
In summary, using three count data models, we re-
examine the effects of scarcity messages on sales and reach
the same conclusions as in Section 4. Specifically, we find
that the disclosure of these messages decreases daily sales.
A P P EN D I X C : A D D I TI O N A L R D D
EVALUATIONS
For the RDD analysis, we use the same polynomial for
observations on the left-hand side of the threshold and
F I G U R E C 1 Distribution of dependent variable [Color figure
can be viewed at wileyonlinelibrary.com]
on the right-hand side of the threshold. We tried first-,
second-, and third-order polynomials and obtained rea-
sonably consistent results from all three specifications.
Below, we provide all the details of the additional evalua-
tions we performed to evaluate the rigor of this analysis.
Figure C1 shows the distribution of our dependent
variable (log daily sales) over inventory levels. We cannot
visually detect any structural difference around the
threshold value of inventory level of 5 units from this fig-
ure. Lee and Lemieux (2010) point out that a graphical
presentation of an RDD should not be tilted toward
either finding an effect or finding no effect (pp. 283–284).
Discontinuity around the threshold can be masked if the
effects of other control variables (e.g., price, SKU-specific
characteristics) are not properly accounted for. Using our
regression approach, we can properly control the effects
of other factors and then formally estimate the disconti-
nuity around the threshold
18 PARK ET AL.

Next, we examine whether there exist abrupt changes (F-test) and find that the null hypothesis of no difference
near the threshold in the key control variable—log price. If cannot be rejected (F-value = 1.254, p value = .258). This
there exist such abrupt changes, the observed discontinuity finding implies that the observed discontinuity around the
in the dependent variable might be driven by the control threshold could be mainly due to the scarcity message and
variable and not by the scarcity message. Figure C2 shows not due to a discontinuity in the control variable, adding
the distribution of log price over inventory levels. We can validity to our results.
observe that the distribution of the control variable is com- Next, we investigate the robustness of our results to
parable over different levels of inventory near the threshold alternative specifications in RDD. Note that we use a para-
of 5 units. We formally test whether log price is different metric polynomial regression approach in RDD. Polyno-
across inventory levels using analysis of variance (ANOVA) mial regression has some advantages compared to
nonparametric local linear regression—appropriate when
9 sample size is relatively small and does not need to specify
ln(price) kernel and bandwidth parameter. However, researchers
8
7 have to determine the order of the polynomial function. In
6 the body of the article, we use the first-order polynomials
5 and estimate the model in Equation (2).
4 To show the robustness of our results to alternative
3 polynomial specifications, we estimate the following
2 second- and third-order polynomial regressions and
1 report the results in Table C1:
0
1 2 3 4 5 6 7 8 9 10 X
Inventory lnðSalesid + 1Þ = αi + β  I ðd∈mÞ + γ  SMid + δ
m m
 lnðPid Þ + θ1  ðInvid −τÞ +
F I G U R E C 2 Distribution of control variables. Note: Ends of
solid lines indicate maximum and minimum values. Boxes indicate
ρ1  ðInvid −τÞ  SMid + θ2  ðInvid −τÞ2 + ρ2  ðInvid −τÞ2
the 95% intervals
 SMid + εid ,
ðC1Þ

TABLE C1 Robustness check using alternative polynomial regression specifications

Second-order specification Third-order specification

Dependent var.: ln(Sales+1) Dependent var.: ln(Sales+1)

Parameter Estimate SE t-val. Estimate SE t-val.

Price for sales −0.031** 0.014 −2.208 −0.030** 0.014 −2.202
Scarcity message −0.006 0.020 −0.309 −0.118*** 0.023 −5.132
θ1 0.001** 0.000 3.125 0.001** 0.000 2.557
ρ1 0.235*** 0.020 11.638 −0.161*** 0.040 −4.036
θ2 0.000*** 0.000 −4.618 0.000** 0.000 −2.067
ρ2 0.054*** 0.004 12.367 −0.171*** 0.020 −8.535
θ3 — — — 0.000 0.000 0.941
ρ3 — — — −0.033*** 0.003 −11.489
SKU fixed effect Yes Yes
Month fixed effect Yes Yes
F statistic 23.75*** 24.27***
R-square 0.154 0.158
Adj. R-square 0.148 0.152
Number of observations 27,044 27,044

Note: Clustered standard errors are used.

*Significance at 10%, **significance at 5%, ***significance at 1%.
PARK ET AL. 19

sideration in our analyses. Moreover, we observed that

X
lnðSalesid + 1Þ = αi + β  I ðd∈mÞ + γ  SMid + δ
m m
 lnðPid Þ + θ1  ðInvid −τÞ +
ρ1  ðInvid −τÞ  SMid + θ2  ðInvid − τÞ2 + ρ2  ðInvid −τÞ2
 SMid + θ3  ðInvid −τÞ3
+ ρ3  ðInvid − τÞ3  SMid + εid ,
According to the results, the coefficient of scarcity
message is negative in the second- and third-order speci-
fication models. Moreover, although the polynomial
terms are highly correlated among each other by con-
struction and this quickly increases the standard errors in
the estimation, the results show that the scarcity message
effect is statistically significant (−0.118, p < .01) under
the third-order polynomial specification and that this
specification has the highest adj. R-square value of all
specifications (adj. R-square = 0.152).
most of these OOS observations involved only 20 SKUs
for which the total days of OOS was above 10% of their
observation periods. It is possible that the reason most
OOS observations involved these SKUs is that they were
subject a priori to lower fill rate targets relative to those
for the rest of the SKUs in the sample. Thus, because
demand measures may be “biased” by the inclusion of
ðC2Þ these SKUs, we constructed a new dataset that excluded
them from consideration and then used this dataset to re-
estimate the RDD model in Equation (2). As we show in
Table D1, the results we obtained from this revised
dataset are consistent with those in Table 3. Thus, our
results are robust to noises or random shocks in demand
due to potential differentials in fill rate policies across the
SKUs in the sample.
A PP E N D IX E : R ES U L TS F R O M
A LT ER N A TI VE RD D SP E C IF I C A T IO N S F O R
HETEROGENEITY EFFECTS

A P P EN D I X D: R E S U L TS EX C L U D I N G S KU S We use HighAS as an indicator variable that takes a value

WI TH EXTE NDE D OOS O BS ER VAT IO NS
As we explained, there were 1,634 SKU-day observations
with OOS (i.e., the available inventory was zero units).
Because consumers cannot purchase products during
these periods, we removed these observations from con-
of 1 if the average daily sales of an SKU i is greater than
the median of average daily sales of all sample products,
or zero otherwise. Table E1 presents the results. These
results are consistent to those in Table 4 (in Section 4).
TABLE E1 Estimation results using RDD interaction models

Dependent var.: ln(Sales+1)

TABLE D1 Estimation results using RDD
Parameters Estimate SE t-val.
Dependent var.: ln(Sales+1) Price for sales (δ) −0.028** 0.014 −2.045
Parameter Estimate SE t-val. Scarcity message
Price for sales −0.067*** 0.015 −4.469 γ0 −0.109*** 0.017 −6.404
Scarcity message −0.155*** 0.017 −9.092 γS −0.189*** 0.018 −10.278
θ 0.000 0.000 −0.911 θ −0.0003** 0.0001 −3.124
ρ 0.009 0.006 1.623 ρ −0.010** 0.005 −2.004
SKU fixed effect Yes SKU fixed effect (αi) Yes
Month fixed effect Yes Month fixed effect (βm) Yes
F statistic 22.983*** F statistic 23.49***
R-square 0.154 R-square 0.152
Adj. R-square 0.147 Adj. R-square 0.146
Number of observations 23,439 Number of observations 27,044

Note: Clustered std. errors are used. Note: Clustered standard errors are used.
**Significance at 5%, ***significance at 1%. **Significance at 5%, ***significance at 1%.