Behavioral research has found that consumers respond to variability in prices in addition to price levels. We show that this finding can explain why some firms vary their prices more frequently than others. We examine pricing strategies composed of an average price and price variability and...

We conduct Monte Carlo experiments to investigate the biases of assuming a misspecified demand model. We study continuous models (linear, log-linear and AIDS), and discrete choice models (logit) in the context of differentiated products and aggregate data. Estimating demand with the 'wrong'...