Countercyclical Price Movements during Periods of Peak Demand: Evidence from Grocery Retail Price for Avocados
Using a unique micro dataset and advanced panel models, this study examines the effects of demand shocks on grocery retail price for avocados, a key Californian fresh produce commodity. Retail prices for avocados exhibited countercyclical movements over seasonal demand shocks for avocados associated with some holidays and events. Demand for avocados is shown to be higher during some holidays/events, e.g., Christmas/New Year, Super Bowl Sunday, and Cinco de Mayo. Super Bowl Sunday and Cinco de Mayo are identified as holidays/events associated with idiosyncratic demand peaks for avocados, but not associated with high aggregate consumer demand. Retail price and margin were significantly lower during some holidays/events associated with high demand for avocados, e.g., Christmas/New Year, Super Bowl Sunday, and Cinco de Mayo. The study also shows that the increase in demand and decrease in retail price during holidays/events with demand peaks for avocados was present for both large and small sizes of avocados, and the size of demand increases and the size of price reductions were not statistically different between large and small size of avocados. Furthermore, shipping price did not change or increased slightly, and hence moved opposite from retail the price during most holidays/events with high demand for avocados. We examine and test the predictions by four classes of theories that put forward to explaining countercyclical price movements over demand peaks. Overall, the evidence provides support for the Lal and Matutes (1994) model that retailers reduce retail prices and/or margins during a commodity's high-demand periods, but does not support alternative explanations for countercyclical price movements, such as Bernheim and Whinston (1990), Warner and Barskey (1995), or Nevo and Hatzitaskos (2006). The findings are consistent with the findings by Chevalier, Kashyap, and Rossi (2003). The study estimates the effects of the CAC's promotion programs on retail sales, retail price, and shipping price at disaggregate level. The analysis demonstrates that the CAC's promotion programs were associated with positive retail sales. In particular, the evidence from the long-panel data suggests that the CAC's promotion programs were successful in raising avocado sales. There is no evidence that retailers charged higher prices during the CAC's promotions.
|Date of creation:||2008|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003.
"Instrumental variables and GMM: Estimation and testing,"
StataCorp LP, vol. 3(1), pages 1-31, March.
- Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," United Kingdom Stata Users' Group Meetings 2003 02, Stata Users Group.
- Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," Boston College Working Papers in Economics 545, Boston College Department of Economics, revised 14 Feb 2003.
- Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003 05, Stata Users Group.
- 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.
- Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2000. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," NBER Working Papers 7981, National Bureau of Economic Research, Inc.
- 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.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
- 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, Oxford University Press, vol. 110(2), pages 321-352.
- Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-370, July.
- David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
- Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, September.
- Christopher F Baum & Mark E Schaffer & Steven Stillman, 2002. "IVREG2: Stata module for extended instrumental variables/2SLS and GMM estimation," Statistical Software Components S425401, Boston College Department of Economics, revised 09 Feb 2016.
- MacDonald, James M, 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.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ags:aaea08:6251. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.