The second essay investigates a manufacturer‘s optimal timing and depth of price promotions over a planning horizon in a frequently purchased packaged goods context.Promotion policy is the equilibrium outcomes of a dynamic game between consumers and the manufacturer. Consumers form expectation over future promotions and strategically time their purchase to coincide with the manufacturer‘s promotion events.The forward-looking manufacturer takes this consumer behavior into account and dynamically evaluates promotional response of consumers in each choice segment based on their inventory levels when making optimal promotion decisions. Our analysis comprises of two steps. In the first step, we obtain heterogeneous demand side parameters with a dynamic structural model. Consumers decide whether to buy, which
brand to buy and how much to buy conditional on their rational expectations of future promotions. In the second step, we specify a dynamic game between consumers and the manufacturer and solve for the optimal promotion policies, taking the structural demand side parameters from the first step as given. Our empirical analysis is based on household level panel data in the canned tuna category, which comprises two major brands-StarKistand Chicken of the Sea.