Were Consumers Less Price Sensitive to Life Necessities during the COVID-19 Pandemic? An Empirical Study on Dutch Consumers

This research investigates if consumers were less price sensitive to life necessities during the COVID-19 pandemic via a demand modeling system. Consumers' price sensitivity was explicitly quantified by the price elasticity of demand. Consumer behavior in nine categories of products considered as life necessities were studied in two non-overlapping time periods: a year before the onset of the COVID pandemic and a year following the initial panic buying caused by the declaration of the COVID pandemic. The changes in price elasticity of demand between the the two periods across the nine product categories were determined from the weekly sales data of a Dutch retailer. Using the proposed demand modeling system applied to available data, it was empirically found that the majority of essential food products were price inelastic, while the majority of non-food products were price elastic during the COVID period. Among the nine product categories, four categories were identified to have significantly different elasticities across the two time periods, while eight categories were observed to have practically smaller magnitudes in elasticities. These insights not only prove the usefulness of the proposed demand modeling system, but also provide valuable theoretical and managerial implications for retail business practitioners, particularly in pricing and inventory planning