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Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data

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  • Judith A. Chevalier
  • Anil K. Kashyap
  • Peter E. Rossi

Abstract

We examine the retail prices and wholesale prices of a large supermarket chain in Chicago over seven and one-half years. We show that prices tend to fall during the seasonal demand peak for a product and that changes in retail margins account for most of those price changes; thus we add to the growing body of evidence that markups are counter-cyclical. The pattern of margin changes that we observe is consistent with loss leader' models such as the Lal and Matutes (1994) model of retailer pricing and advertising competition. Other models of imperfect competition are less consistent with retailer behavior. Manufacturer behavior plays a more limited role in the counter-cyclicality of prices.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:7981
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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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