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Countercyclical pricing: A consumer heterogeneity explanation

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  • Guler, Ali Umut
  • Misra, Kanishka
  • Vilcassim, Naufel

Abstract

We show that a seasonal good could be priced countercyclically due to the heterogeneous seasonal shifts in consumer valuations. We provide empirical support for our explanation based on two product categories (canned soup and tuna) studied in the literature.

Suggested Citation

  • Guler, Ali Umut & Misra, Kanishka & Vilcassim, Naufel, 2014. "Countercyclical pricing: A consumer heterogeneity explanation," Economics Letters, Elsevier, vol. 122(2), pages 343-347.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:343-347
    DOI: 10.1016/j.econlet.2013.12.025
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    References listed on IDEAS

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    1. David Besanko & Sachin Gupta & Dipak Jain, 1998. "Logit Demand Estimation Under Competitive Pricing Behavior: An Equilibrium Framework," Management Science, INFORMS, vol. 44(11-Part-1), pages 1533-1547, November.
    2. Elizabeth J. Warner & Robert B. Barsky, 1995. "The Timing and Magnitude of Retail Store Markdowns: Evidence from Weekends and Holidays," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 321-352.
    3. James M. MacDonald, 2000. "Demand, Information, and Competition: Why Do Food Prices Fall at Seasonal Demand Peaks?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 27-45, March.
    4. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-370, July.
    5. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," American Economic Review, American Economic Association, vol. 93(1), pages 15-37, March.
    6. Aviv Nevo & Konstantinos Hatzitaskos, 2005. "Why Does the Average Price of Tuna Fall During Lent?," NBER Working Papers 11572, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Guler, Ali Umut, 2021. "Seasonal price effects of mergers," Economics Letters, Elsevier, vol. 209(C).
    2. Dong, Xiao, 2023. "Does seasonal product rotation contribute to countercyclical pricing and cheaper turkeys during Thanksgiving, Christmas, and Easter?," Economics Letters, Elsevier, vol. 225(C).
    3. Anja Lambrecht & Kanishka Misra, 2017. "Fee or Free: When Should Firms Charge for Online Content?," Management Science, INFORMS, vol. 63(4), pages 1150-1165, April.
    4. Avery Haviv, 2022. "Consumer Search, Price Promotions, and Counter-Cyclic Pricing," Marketing Science, INFORMS, vol. 41(2), pages 294-314, March.
    5. Minjung Kwon & Tülin Erdem & Masakazu Ishihara, 2023. "Counter-cyclical price promotion: Capturing seasonal changes in stockpiling and endogenous consumption," Quantitative Marketing and Economics (QME), Springer, vol. 21(4), pages 437-492, December.
    6. Dong, Xiao, 2022. "Lack of local pricing response in national retail chains during large and localized demand peaks: Evidence from college move-ins and instant noodles," Economics Letters, Elsevier, vol. 213(C).
    7. Hao Lan & Tim Lloyd & Wyn Morgan & Paul W. Dobson, 2022. "Are food price promotions predictable? The hazard function of supermarket discounts," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(1), pages 64-85, February.

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    More about this item

    Keywords

    Seasonality; Countercyclical pricing; Retail; Consumer heterogeneity;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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