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Sales : tests of theories on causality and timing

  • Berck, Peter

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Brown, Jennifer
  • Perloff, Jeffrey M.

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Villas-Boas, Sofia B

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

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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File URL: http://repositories.cdlib.org/are_ucb/1031
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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1031.

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Length: 44 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:are:cudare:1031
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  1. 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.
  2. Shantanu Dutta & Mark Bergen & Daniel Levy, 2002. "Price Flexibility in Channels of Distribution: Evidence from Scanner Data," Working Papers 2002-10, Bar-Ilan University, Department of Economics.
  3. 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.
  4. Iga Hendel & Aviv Nevo, 2002. "Sales and Consumer Inventory," Microeconomics 0201001, EconWPA.
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  6. Martin Pesendorfer, 2002. "Retail Sales: A Study of Pricing Behavior in Supermarkets," The Journal of Business, University of Chicago Press, vol. 75(1), pages 33-66, January.
  7. Daniel Hosken & David Reiffen, 2004. "Patterns of Retail Price Variation," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 128-146, Spring.
  8. 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.
  9. Perloff, Jeffrey M. & Wu, Ximing, 2007. "Tax incidence varies across the price distribution," Economics Letters, Elsevier, vol. 96(1), pages 116-119, July.
  10. Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
  11. 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.
  12. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  13. Rajiv Lal, 1990. "Price Promotions: Limiting Competitive Encroachment," Marketing Science, INFORMS, vol. 9(3), pages 247-262.
  14. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
  15. Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
  16. Deepak Agrawal, 1996. "Effect of Brand Loyalty on Advertising and Trade Promotions: A Game Theoretic Analysis with Empirical Evidence," Marketing Science, INFORMS, vol. 15(1), pages 86-108.
  17. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 353-68, July.
  18. Aguirregabiria, Victor, 1999. "The Dynamics of Markups and Inventories in Retailing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 275-308, April.
  19. Nakamura, Emi & Steinsson, Jón, 2011. "Price setting in forward-looking customer markets," Journal of Monetary Economics, Elsevier, vol. 58(3), pages 220-233.
  20. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
  21. 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.
  22. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  23. Robert C. Blattberg & Richard Briesch & Edward J. Fox, 1995. "How Promotions Work," Marketing Science, INFORMS, vol. 14(3_supplem), pages G122-G132.
  24. 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.
  25. 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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