Does Inventory Influence Demand? Exploring Billboard and Scarcity Effects

Operations and Information Management Department; Faculty Adviser: Marshall Fisher

Using in-store experiments in two different product categories, this study investigates how the amount of inventory displayed in the store influences cusomters’ buying decision. Two conflicting notions, the billboard and scarcity effect, are explored. According to the billboard effect, a large amount of item inventory displayed stimulates purchases because of the product visibility and inference that the product is popular. The scarcity effect claims the opposite, namely that a low inventory displayed in the store makes shoppers buy because they infer that the product in unique of that many people have bought it.