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Retail Pricing and Clearance Sales

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Author Info
Lazear, Edward P

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Abstract

Sellers of new products are faced with having to guess demand conditions to set price appropriately. But sellers are able to adjustprice over time and to learn from past mistakes. Additionally, it is not necessary that all goods be sold with certainty. It is sometimes better to set a high price and to risk no sale. This process is modeledto explain retail pricing behavior and the time distribution of transactions. Prices start high and fall as a function of time on theshelf. The initial price and rate of decline can be predicted and depends on thinness of the market, the proportion of customers who are"window shoppers," and other observable characteristics. Copyright 1986 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 76 (1986)
Issue (Month): 1 (March)
Pages: 14-32
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Handle: RePEc:aea:aecrev:v:76:y:1986:i:1:p:14-32

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  4. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics, Springer, vol. 5(3), pages 239-292, September. [Downloadable!] (restricted)
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  5. Loreto Lira, 2007. "Why Do Some Prices In The Retail Sector Drop When Demand Rises? Evidence From The Chilean Case," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 10(2), pages 151-168. [Downloadable!]
  6. Pascal Courty & Li Hao, 1998. "Timing of Seasonal Sales," Economics Working Papers 331, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  7. Emi Nakamura, 2008. "Pass-Through in Retail and Wholesale," NBER Working Papers 13965, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Kyle Bagwell & Michael Riordan, 1988. "High and Declining Prices Signal Product Quality," Discussion Papers 808, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  9. Timothy J. Richards, 2006. "Sales by multi-product retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 261-277. [Downloadable!]
  10. Sofia Villas-Boas & Miguel Villas-Boas, 2006. "Learning, Forgetting, and Sales," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 1020, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
  11. Emi Nakamura & Jon Steinsson, 2005. "Price Setting in a Forward-Looking Customer Market," Macroeconomics 0509010, EconWPA. [Downloadable!]
  12. Tom S. Lee & I.P.L. Png, 2004. "Loss Leaders: An Indirect Empirical Test," Industrial Organization 0401008, EconWPA. [Downloadable!]
  13. Kislaya Prasad, 2008. "Price asymptotics," Review of Economic Design, Springer, vol. 12(1), pages 21-32, April. [Downloadable!] (restricted)
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