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

Author Info

Listed author(s):
  • Peter E. Rossi

    ()

    (Graduate School of Business)

  • Judith A. Chevalier

    ()

    (School of Management)

  • Anil K. Kashyap

    ()

    (Graduate School of Business)

Abstract

We examine retail and wholesale prices for a large supermarket chain over seven and one-half years. We find that prices fall on average during seasonal demand peaks for a product, largely due to changes in retail margins. Retail margins for specific goods fall during peak demand periods for that good, even if these periods do not coincide with aggregate demand peaks for the retailer. This is consistent with "loss leader" models of retailer competition. Models stressing cyclical demand elasticities or cyclical firm conduct are less consistent with our findings. Manufacturer behavior plays a limited role in the counter-cyclicality of prices.

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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm291.

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Date of creation: 10 Sep 2002
Handle: RePEc:ysm:somwrk:ysm291
Contact details of provider: Web page: http://icf.som.yale.edu/

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Keywords: Pricing; Seasonality; Retail; Competition;

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Find related papers by JEL classification:
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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  16. Rotemberg, Julio J & Woodford, Michael, 1992. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1153-1207, December.
  17. Julio J. Rotemberg & Garth Saloner, 1984. "A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms," NBER Working Papers 1412, National Bureau of Economic Research, Inc.
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