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

Author

Listed:
  • 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.

Suggested Citation

  • Loreto Lira, 2007. "Why Do Some Prices In The Retail Sector Drop When Demand Rises? Evidence From The Chilean Case," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 10(2), pages 151-168.
    • Handle: RePEc:pch:abante:v:10:y:2007:i:2:p:151-168
    as

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    File URL: http://www.abante.cl/files/ABT/Contenidos/Vol-10-N2/Lira.pdf
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    References listed on IDEAS

    as
    1. B. Peter Pashigian & Brian Bowen, 1991. "Why Are Products Sold on Sale?: Explanations of Pricing Regularities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1015-1038.
    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. 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.
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    More about this item

    Keywords

    Retailing; Prices; Loss leaders; Chile;
    All these keywords.

    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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