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How do retailers compete on price promotions? Evidence from a temporary promotion ban in Belgium

Author

Listed:
  • Hindriks, Jean

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Madio, Leonardo

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Serse, Valerio

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

Abstract

In March 2020, the Belgian government imposed a two-week promotion ban to contain panic buying at the beginning of the Covid-19 Pandemic. Using a unique daily dataset tracking list prices and promotions in different retail chains at the store level, we investigate how retailers set price promotions once the ban was lifted. We find that both frequency and size of promotions reverted to the pre-ban but only several months after the ban was lifted. This effect presents large heterogeneity across retailers: one chain acted as a promotion leader, reintroducing promotions quicker than others. Another large chain acted as a promotion follower, reintroducing promotions more gradually but eventually setting more frequent and larger price promotions than in the pre-ban period. Overall, the promotion ban was a major factor driving up sale prices in Belgian stores.

Suggested Citation

  • Hindriks, Jean & Madio, Leonardo & Serse, Valerio, 2022. "How do retailers compete on price promotions? Evidence from a temporary promotion ban in Belgium," LIDAM Discussion Papers CORE 2022005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2022005
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    References listed on IDEAS

    as
    1. Xavier Jaravel & Martin O'Connell, 2020. "High‐Frequency Changes in Shopping Behaviours, Promotions and the Measurement of Inflation: Evidence from the Great Lockdown," Fiscal Studies, John Wiley & Sons, vol. 41(3), pages 733-755, September.
    2. Jean Hindriks & Leonardo Madio & Valerio Serse, 2021. "Promotion Ban and Heterogeneity in Retail Prices during the Great Lockdown," CESifo Working Paper Series 9074, CESifo.
    3. Günter J. Hitsch & Ali Hortaçsu & Xiliang Lin, 2021. "Prices and promotions in U.S. retail markets," Quantitative Marketing and Economics (QME), Springer, vol. 19(3), pages 289-368, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Price promotions ; promotion ban ; retailers ; competition;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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