A Theory of Clearance Sales
Abstract
Clearance sales are widely used by firms as an intertemporal selling policy, in particular in markets where firms face demand uncertainty and need to choose capacity in advance. Clearance sales consist in charging a high price initially but then lowering the price in the sales period. High-valuation consumers purchase the good at the high initial price so as to avoid rationing at the low price, while low-valuation consumers wait for the price to drop. We develop a simple model of intertemporal monopoly pricing under demand uncertainty, and show that clearance sales may be the optimal intertemporal selling policy. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.Download Info
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Bibliographic Info
Article provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 117 (2007)
Issue (Month): 522 (07)
Pages: 964-990
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Philippe Choné & Romain De Nijs & Lionel Wilner, 2012. "Intertemporal Pricing with Unobserved Consumer Arrival Times," Working Papers 2012-23, Centre de Recherche en Economie et Statistique.
- Félix Muñoz-García & Heriberto González Lozano, 2009. "“Last-chance” sales: what makes them credible?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 61-80, May.
- X. DHaultfoeuille & P. Fevrier & L. Wilner, 2012. "Demand Estimation in the Presence of Revenue Management," Documents de Travail de la DESE - Working Papers of the DESE g2012-13, Institut National de la Statistique et des Etudes Economiques, DESE.
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