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Price Discounts and Cheapflation during the Post-Pandemic Inflation Surge

In: Inflation in the COVID Era and Beyond

Author

Listed:
  • Alberto Cavallo
  • Oleksiy Kryvtsov

Abstract

We study how within-store price variation changes with inflation, and whether households exploit it to attenuate the inflation burden. We use micro price data for food products sold by 91 large multi-channel retailers in ten countries between 2018 and 2024. Measuring unit prices within narrowly defined product categories, we analyze two key sources of variation in prices within a store: temporary price discounts and differences across similar products. Price changes associated with discounts grew at a much lower average rate than regular prices, helping to mitigate the inflation burden. By contrast, cheapflation – a faster rise in prices of cheaper goods relative to prices of more expensive varieties of the same good – exacerbated it. Using Canadian Homescan Panel Data, we estimate that spending on discounts reduced the change in the average unit price by 4.1 percentage points, but expenditure switching to cheaper brands raised it by 2.8 percentage points.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alberto Cavallo & Oleksiy Kryvtsov, 2024. "Price Discounts and Cheapflation during the Post-Pandemic Inflation Surge," NBER Chapters, in: Inflation in the COVID Era and Beyond, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:15071
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    Cited by:

    1. Stephen Murchison, 2025. "Non-homothetic Preferences and the Demand Channel of Inflation," Staff Working Papers 25-30, Bank of Canada.
    2. Dragan Dživdžanovic, 2025. "Examining cheapflation in Serbia in the 2022-2024 period," Working Papers Bulletin 28, National Bank of Serbia.
    3. Tao Chen & Peter Levell & Martin O'Connell, 2025. "Measuring cost of living inequality during an inflation surge," IFS Working Papers W25/21, Institute for Fiscal Studies.
    4. Pathak Chalise, Prayash, 2025. "Household-Level Food Price Inflation Heterogeneity: Evidence and Insights from the U.S. Consumer Panel Data (2013-2023)," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360870, Agricultural and Applied Economics Association.
    5. Domenech Palacios, Mar, 2025. "Inflation risk and heterogeneous trading down," Working Paper Series 3156, European Central Bank.
    6. Tao Chen & Peter Levell & Martin O'Connell, 2024. "Cheapflation and the rise of inflation inequality," IFS Working Papers W36, Institute for Fiscal Studies.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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