Abstract
To determine how an exogenous supply shock affects product availability, prices, and price-setting behavior, we analyzed a unique dataset representing a natural experiment concerning the 2011 flood in Thailand, which affected the production facilities of Western Digital, the world's largest producer of hard drives. The natural disaster impacted the overseas inventory of hard drives in the United States, where availability declined by more than 40% and price indexes increased by as much as 38%. However, our findings suggest that such supply shocks, when transmitted to either substitute or complementary products, are likely to be absorbed within production networks.
| Original language | English |
|---|---|
| Journal | Economic Inquiry |
| Early online date | 31 Mar 2023 |
| DOIs | |
| Publication status | E-pub ahead of print - 31 Mar 2023 |
Bibliographical note
Funding Information:Standard disclaimer applies. The authors thank Tho Pham and the participants of the ESCoE Conference on Economic Measurement for valuable comments and suggestions. Any remaining errors are our own. No external funding sources supported this research.
Publisher Copyright:
© 2023 The Authors. Economic Inquiry published by Wiley Periodicals LLC on behalf of Western Economic Association International.
Keywords
- hard drive
- inventory
- natural disaster
- price stickiness
- supply shock
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Economics and Econometrics