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Why Does the Average Price of Tuna Fall During Lent?

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  • Aviv Nevo
  • Konstantinos Hatzitaskos

Abstract

For many products the average price paid by consumers falls during periods of high demand. We use information from a large supermarket chain to decompose the decrease in the average price into a substitution effect, due to an increase in the share of cheaper products, and a price reduction effect. We find that for almost all the products we study the substitution effect explains a large part of the decrease. We estimate demand for these products and show the price declines are consistent with a change in demand elasticity and the relative demand for different brands. Our findings are less consistent with "loss-leader" models of retail competition.

Suggested Citation

  • Aviv Nevo & Konstantinos Hatzitaskos, 2005. "Why Does the Average Price of Tuna Fall During Lent?," NBER Working Papers 11572, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11572
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    1. 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.
    2. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    3. 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.
    4. Mark Bils, 1989. "Pricing in a Customer Market," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 699-718.
    5. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    6. 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.
    7. Pashigian, B Peter, 1988. "Demand Uncertainty and Sales: A Study of Fashion and Markdown Pricin g," American Economic Review, American Economic Association, vol. 78(5), pages 936-953, December.
    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.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why Does Turkey Get Cheaper Around Thanksgiving?
      by Matthew Yglesias in Moneybox on 2012-11-21 21:07:00

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    Cited by:

    1. Tenn, Steven & Yun, John M., 2008. "Biases in demand analysis due to variation in retail distribution," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 984-997, July.
    2. Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2013. "A Structural Approach to Identifying the Sources of Local Currency Price Stability," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 175-210.
    3. David Genesove & Avi Simhon, 2015. "Seasonality and the Effect of Advertising on Price," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 199-222, March.
    4. Orbach, Barak Y. & Einav, Liran, 2007. "Uniform prices for differentiated goods: The case of the movie-theater industry," International Review of Law and Economics, Elsevier, vol. 27(2), pages 129-153.
    5. Saul Lach, 2007. "Immigration and Prices," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 548-587, August.
    6. Judith A. Chevalier & Anil K. Kashyap, 2011. "Best Prices," NBER Working Papers 16680, National Bureau of Economic Research, Inc.
    7. Guler, Ali Umut & Misra, Kanishka & Vilcassim, Naufel, 2014. "Countercyclical pricing: A consumer heterogeneity explanation," Economics Letters, Elsevier, vol. 122(2), pages 343-347.

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