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Sales: Tests of Theories on Causality and Timing

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  • Berck, Peter
  • Brown, Jennifer
  • Perloff, Jeffrey M
  • Villas-Boas, Sofia B.

Abstract

Modern theories of sales make conflicting predictions about the temporal pattern of sales, which we test using grocery scanner data. We examine both frozen orange juice, which consumers can store, and refrigerated orange juice, which is more perishable, to determine what role-if any-durability plays in the pattern of sales. We examine (1) whether sales are more frequent for national brands than for private label brands; (2) whether manufacturers, retailers, or others determine sales; (3) the distribution of prices; (4) whether sales and their effects differ for durable (frozen) or nondurable (refrigerated) products; and (5) the temporal ordering of sales. We use correlations, runs tests, probit regressions, and vector-autoregressive analyses to test our hypotheses. Some of our more striking findings are that retailers rather than manufacturers determine sales, private labels have sales as often as national brands, and that a sale of a national brand is more likely to "cause" sales of other products than is a sale of a private label product.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt2g56n1jk.

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Date of creation: 01 Dec 2007
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Handle: RePEc:cdl:agrebk:qt2g56n1jk

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Related research

Keywords: sales; price promotions; causality; Social and Behavioral Sciences;

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References

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  1. Igal Hendel & Aviv Nevo, 2002. "Sales and Consumer Inventory," NBER Working Papers 9048, National Bureau of Economic Research, Inc.
  2. Rajiv Lal, 1990. "Price Promotions: Limiting Competitive Encroachment," Marketing Science, INFORMS, vol. 9(3), pages 247-262.
  3. Nakamura, Emi & Steinsson, Jón, 2011. "Price setting in forward-looking customer markets," Journal of Monetary Economics, Elsevier, vol. 58(3), pages 220-233.
  4. 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.
  5. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
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  8. Villas-Boas, Sofia B., 2007. "Vertical relationships between manufacturers and retailers: inference with limited data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6gz1t778, Department of Agricultural & Resource Economics, UC Berkeley.
  9. Shantanu Dutta & Mark Bergen & Daniel Levy, 2004. "Price Flexibility in Channels of Distribution: Evidence from Scanner Data," Macroeconomics 0402018, EconWPA.
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  13. Perloff, Jeffrey M. & Wu, Ximing, 2007. "Tax incidence varies across the price distribution," Economics Letters, Elsevier, vol. 96(1), pages 116-119, July.
  14. Conlisk, John & Gerstner, Eitan & Sobel, Joel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 489-505, August.
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  17. Salop, S & Stiglitz, J E, 1982. "The Theory of Sales: A Simple Model of Equilibrium Price Dispersion with Identical Agents," American Economic Review, American Economic Association, vol. 72(5), pages 1121-30, December.
  18. Robert C. Blattberg & Richard Briesch & Edward J. Fox, 1995. "How Promotions Work," Marketing Science, INFORMS, vol. 14(3_supplem), pages G122-G132.
  19. Daniel Hosken & David Reiffen, 2004. "Patterns of Retail Price Variation," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 128-146, Spring.
  20. Warner, Elizabeth J & Barsky, Robert B, 1995. "The Timing and Magnitude of Retail Store Markdowns: Evidence from Weekends and Holidays," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 321-52, May.
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  23. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
  24. Rajiv Lal & J. Miguel Villas-Boas, 1998. "Price Promotions and Trade Deals with Multiproduct Retailers," Management Science, INFORMS, vol. 44(7), pages 935-949, July.
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Citations

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Cited by:
  1. 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.
  2. Empen, Janine & Loy, Jens-Peter & Weiss, Christoph R., 2011. "Price Promotions and Brand Loyalty: Empirical Evidence for the German Breakfast Cereals Market," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114341, European Association of Agricultural Economists.
  3. Davis, David E., 2009. "Price and promotion effects of supermarket mergers," SDSU Working Papers in Progress 12009, South Dakota State University, Department of Economics, revised Jun 2010.
  4. Anania, Giovanni & Nisticò, Rosanna, 2014. "Price dispersion and seller heterogeneity in retail food markets," Food Policy, Elsevier, vol. 44(C), pages 190-201.
  5. 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.
  6. Peter Berck & Ephraim Leibtag & Alex Solis & Sofia Villas-Boas, 2009. "Patterns of Pass-through of Commodity Price Shocks to Retail Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1456-1461.
  7. Jens-Peter Loy & Christoph R. Weiss, 2009. "Sales by multi-product retailers: a comment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 513-515.
  8. Sofronis Clerides & Pascal Courty, 2010. "Sales, Quantity Surcharge, and Consumer Inattention," Working Paper Series 32_10, The Rimini Centre for Economic Analysis.
  9. Lloyd, Tim A. & Morgan, C. Wyn & McCorriston, Steve & Zgovu, Evious, 2011. "Do Sales Matter? Evidence from UK Food Retailing," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108774, Agricultural Economics Society.
  10. Giovanni Anania & Rosanna Nisticò, 2011. "Price Dispersion, Search Costs And Consumers And Sellers Heterogeneity In Retail Food Markets," Working Papers 201105, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
  11. Lan, Hao & Lloyd, Tim A. & Morgan, C. Wyn, 2013. "The hazard function of sales: An analysis of UK supermarket food prices," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 151972, Agricultural Economics Society.
  12. 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.
  13. Richard Volpe, 2013. "Promotional Competition Between Supermarket Chains," Review of Industrial Organization, Springer, vol. 42(1), pages 45-61, February.
  14. Anania, Giovanni & Nistico, Rosanna, 2012. "Price dispersion, search costs and consumers and sellers heterogeneity in retail food markets," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125594, International Association of Agricultural Economists.
  15. Ferto, Imre & Bakucs, Lajos Zoltan, 2009. "The patterns of retail price variation. The case of milk products," 2009 Conference, August 16-22, 2009, Beijing, China 51670, International Association of Agricultural Economists.

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