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Menu Costs, Posted Prices, and Multiproduct Retailers

  • Shantanu Dutta

    (University of Southern California)

  • Mark Bergen

    (University of Minnesota)

  • Daniel Levy

    (Emory University)

  • Robert Venable

    (Robert W. Baird, Co.)

We use a unique store-level data set to directly measure menu costs and to study the price change process at a large U.S. drugstore chain. We compare and contrast the magnitude of these measures with similar measures from 4 large U.S. supermarket chains. We find that (1) the actual magnitude of menu costs as a share of revenues, (2) menu costs per price change, (3) the frequent use of promotional pricing, and (4) the use of weekly pricing rules, are similar across both retail formats. Given that the main common features of these two types of retail formats are that (i) they both use posted prices, and (ii) both are multiproduct retailers selling a large number of products, our findings suggest that the magnitude of the menu cost components we measure, and the price change practices we document, may be generalizable across retail formats with these two features.

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File URL: http://128.118.178.162/eps/mac/papers/0505/0505007.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0505007.

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Length: 32 pages
Date of creation: 12 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0505007
Note: Type of Document - pdf; pages: 32
Contact details of provider: Web page: http://128.118.178.162

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