Abstract
AbstractTo 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.
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