Estimating Demand for Fashion Goods: A Field Experiment

In the fashion goods industry, it is uncommon to offer temporary price discounts. Due to the lack of item-level price variation it is difficult to estimate both customer and item-level demand using conventional approaches. Since managers often have poor estimates of demand, they often rely on heuristics for marketing decisions such as pricing, cross-selling and customer targeting. In this essay, we illustrate how the combination of a price field experiment and model can be used to estimate product demand for fashion goods. In the first chapter, we estimate a multivariate choice model with a latent factor structure that allows for interdependencies in item demand. We illustrate how the model can be used to address issues of optimal pricing, cross-selling and customer targeting. In the second chapter, we investigate the effects of visual display elements, such as object salience and visual competition, on price elasticity and on consumer product preference correlation.