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Holiday Nonprice Rigidity and Cost of Adjustment

Author

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  • Georg Mueller
  • Mark Bergen
  • Shantanu Dutta
  • Daniel Levy

Abstract

There has been increasing interest in understanding how firms undertake nonprice adjustment activities, especially in situations where prices may be rigid despite changes in market conditions. Using scanner price data for over 4,500 different food products from a large U.S. supermarket chain, we document periods of rigidity in product additions and deletions: new products are less likely to be introduced, and existing products are less likely to be discontinued during holiday periods than throughout the rest of the year. We argue that this is due to higher costs of undertaking these kinds of product assortment activities during holiday periods. We discuss how this relates to the exiting literature on nonprice adjustment and price rigidity.

Suggested Citation

  • Georg Mueller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2006. "Holiday Nonprice Rigidity and Cost of Adjustment," Emory Economics 0612, Department of Economics, Emory University (Atlanta).
  • Handle: RePEc:emo:wp2003:0612
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    References listed on IDEAS

    as
    1. N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 529-538.
    2. Daniel Levy & Haipeng (Allan) Chen & Georg Müller & Shantanu Dutta & Mark Bergen, 2010. "Holiday Price Rigidity and Cost of Price Adjustment," Economica, London School of Economics and Political Science, vol. 77(305), pages 172-198, January.
    3. Andrew T. Young & Daniel Levy, 2014. "Explicit Evidence of an Implicit Contract," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 804-832.
    4. B. Peter Pashigian & Brian Bowen, 1991. "Why Are Products Sold on Sale?: Explanations of Pricing Regularities," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1015-1038.
    5. Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U. S. Supermarket Chains," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 791-824.
    6. Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
    7. Andrew T. Young & Daniel Levy, 2014. "Explicit Evidence of an Implicit Contract," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 804-832.
    8. David Neumark & Steven A. Sharpe, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 657-680.
    9. Levy, Daniel & Dutta, Shantanu & Bergen, Mark, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Microlevel Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 197-220, February.
    10. 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.
    11. Mark J. Zbaracki & Mark Bergen & Daniel Levy, 2006. "The Anatomy of a Price Cut: Discovering Organizational Sources of the Costs of Price Adjustment," Working Papers 2006-3, Bar-Ilan University, Department of Economics.
    12. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
    13. Margaret E. Slade & G.R.E.Q.A.M., 1998. "Optimal Pricing with Costly Adjustment: Evidence from Retail-Grocery Prices," Review of Economic Studies, Oxford University Press, vol. 65(1), pages 87-107.
    14. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, vol. 81(4), pages 938-945, September.
    15. Georg Muller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2006. "Private label price rigidity during holiday periods," Applied Economics Letters, Taylor & Francis Journals, vol. 13(1), pages 57-62.
    16. Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
    17. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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    Cited by:

    1. Erwan Gautier & Ronan Le Saout, 2015. "The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(6), pages 1063-1089, September.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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