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Price Promotions and Trade Deals with Multiproduct Retailers

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Author Info

  • Rajiv Lal

    (Stanford University, Stanford, California 94305)

  • J. Miguel Villas-Boas

    (Haas School of Business, University of California at Berkeley, Berkeley, California 94720-1900)

Abstract

In this paper we study retail price promotions and manufacturer trade deals in markets with multiproduct retailers. We find that in situations where retailers carry more than one competing brand, the promotions across brands can be positively or negatively correlated depending on the structure of the market: the relative sizes of the various market segments (in terms of loyalty to manufacturer, retailer, or the pair manufacturer-retailer). We show that sometimes retailers offer the same discount on different products, but at other times they offer a smaller discount on a brand supported by a bigger trade deal. We also present results on the effects of changes in the sizes of the different market segments on the depth of price promotions and trade deals and on pass through.

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File URL: http://dx.doi.org/10.1287/mnsc.44.7.935
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 44 (1998)
Issue (Month): 7 (July)
Pages: 935-949

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Handle: RePEc:inm:ormnsc:v:44:y:1998:i:7:p:935-949

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Related research

Keywords: Price Promotions; Trade Deals; Multiproduct Retailers; Category Management; Competition;

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Citations

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Cited by:
  1. Hansen, Kristin & Loy, Jens-Peter, 2007. "Multiproduct Food Retail Sales: A Case Study for Germany," 2007 1st Forum, February 15-17, 2007, Innsbruck, Austria 6568, International European Forum on Innovation and System Dynamics in Food Networks.
  2. Bing Jing, 2007. "Product differentiation under imperfect information: When does offering a lower quality pay?," Quantitative Marketing and Economics, Springer, vol. 5(1), pages 35-61, March.
  3. Berck, Peter & Brown, Jennifer & Perloff, Jeffrey M & Villas-Boas, Sofia B., 2007. "Sales: Tests of Theories on Causality and Timing," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2g56n1jk, Department of Agricultural & Resource Economics, UC Berkeley.
  4. Bing Jing & Z. Zhang, 2011. "Product line competition and price promotions," Quantitative Marketing and Economics, Springer, vol. 9(3), pages 275-299, September.
  5. Jianqiang Zhang & Weijun Zhong & Shue Mei, 2012. "Competitive effects of informative advertising in distribution channels," Marketing Letters, Springer, vol. 23(3), pages 561-584, September.
  6. Fertő, Imre & Bakucs, Lajos Zoltán, 2009. "Árleszállítások és a kiskereskedelmi árak változása a tejtermékek piacán
    [Sales and retail price patterns on the market for milk products]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 634-647.
  7. Bakucs, Lajos Zoltan & Ferto, Imre, 2009. "Milk Retail Sales Patterns in a Transition Economy. The Case of Hungary," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 50932, Agricultural Economics Society.
  8. Villas-Boas, Sofia B & Villas-Boas, Miguel, 2006. "Learning, Forgetting, and Sales," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7td275hv, Department of Agricultural & Resource Economics, UC Berkeley.
  9. Lloyd, Tim A. & Morgan, C. Wyn & McCorriston, Steve & Zgovu, Evious, 2009. "Do Sales Matter? An Exploration of Price Discounting in UK Food Retailing," 2009 Conference, August 16-22, 2009, Beijing, China 51572, International Association of Agricultural Economists.
  10. Juan C. Gázquez-Abad & Manuel Sánchez-Pérez, 2009. "Factors influencing olive oil brand choice in Spain: an empirical analysis using scanner data," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 36-55.
  11. Konrad, Kai A., 2010. "Merger profitability in industries with brand portfolios and loyal customers," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-08, Social Science Research Center Berlin (WZB).
  12. Timothy J. Richards, 2006. "Sales by multi-product retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 261-277.
  13. Mathur, Sameer & Sinitsyn, Maxim, 2013. "Price promotions in emerging markets," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 404-416.
  14. Allender, William J. & Richards, Timothy J., 2009. "Measures of Brand Loyalty," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49536, Agricultural and Applied Economics Association.
  15. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005. "Sales and Promotions: A More General Model," Industrial Organization 0508014, EconWPA.
  16. Peter E. Rossi & Judith A. Chevalier & Anil K. Kashyap, 2002. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," Yale School of Management Working Papers ysm291, Yale School of Management.
  17. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Temporal Price Dispersion: Evidence from an Online Consumer Electronics Market," Working Papers 2004-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  18. Wu, Y. & Zhang, D.Z., 2007. "Demand fluctuation and chaotic behaviour by interaction between customers and suppliers," International Journal of Production Economics, Elsevier, vol. 107(1), pages 250-259, May.

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