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Why Do Some Prices In The Retail Sector Drop When Demand Rises? Evidence From The Chilean Case

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Author Info
LORETO LIRA () (Facultad de Ciencias Económicas y Empresariales, Universidad de los Andes.)
Abstract

Internationally, the prices of retail products have been seen to drop during periods of exogenous increases in demand. The purpose of this paper is to study the generality of this stylized fact by investigating whether this behavior also takes place in Chile, through the monthly prices of a set of retail products with positive demand seasonality. The prices of some products show a drop during their peak idiosyncratic demand. Moreover, tha results are consistent with the loss leaders modeL, according to which prices are proactively reduced by retailers in order to attract buyers to stores.

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File URL: http://www.abante.cl/files/ABT/Contenidos/Vol-10-N2/Lira.pdf
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Publisher Info
Article provided by Escuela de Administracion. Pontificia Universidad Católica de Chile. in its journal ABANTE.

Volume (Year): 10 (2007)
Issue (Month): 2 ()
Pages: 151-168
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Handle: RePEc:pch:abante:v:10:y:2007:i:2:p:151-168

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Related research
Keywords: Retailing; Prices; Loss leaders; Chile;

Find related papers by JEL classification:
L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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  1. MacDonald, James M, 2000. "Demand, Information, and Competition: Why Do Food Prices Fall at Seasonal Demand Peaks?," Journal of Industrial Economics, Blackwell Publishing, vol. 48(1), pages 27-45, March. [Downloadable!] (restricted)
  2. 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. [Downloadable!]
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  3. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  4. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July. [Downloadable!] (restricted)
  5. Lazear, Edward P, 1986. "Retail Pricing and Clearance Sales," American Economic Review, American Economic Association, vol. 76(1), pages 14-32, March. [Downloadable!] (restricted)
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This page was last updated on 2009-11-29.

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