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A Generalized Model of Sales

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  • Shelegia, Sandro
  • Wilson, Chris

Abstract

To provide a more flexible workhorse model of temporary price reductions or `sales', this paper presents a substantially generalized `clearinghouse' sales framework. Our framework permits multiple dimensions of firm heterogeneity, and views firms as competing directly in utility rather than prices. The paper i) reproduces and extends many equilibria from the existing literature, ii) offers a range of new results on how firm heterogeneity affects market outcomes, iii) provides original insights into the number and type of firms that use sales, and iv) extends a `cleaning' procedure that is commonly used in empirical studies of sales and price dispersion.

Suggested Citation

  • Shelegia, Sandro & Wilson, Chris, 2016. "A Generalized Model of Sales," EconStor Preprints 147411, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:147411
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    References listed on IDEAS

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    Cited by:

    1. Astorne-Figari, Carmen & López, José Joaquín & Yankelevich, Aleksandr, 2019. "Advertising for consideration," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 653-669.
    2. David P. Myatt, 2019. "A Theory of Stable Price Dispersion," Economics Series Working Papers 873, University of Oxford, Department of Economics.
    3. Montez, João & Marxen, Annabelle, 2020. "Licensing at the patent cliff and market entry," CEPR Discussion Papers 14276, C.E.P.R. Discussion Papers.
    4. Joao Montez & Nicolas Schutz, 2021. "All-Pay Oligopolies: Price Competition with Unobservable Inventory Choices [Extremal Equilibria of Oligopolistic Supergames]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(5), pages 2407-2438.
    5. David Ronayne, 2020. "The Only Dance in Town: Unique Equilibrium in a Generalized Model of Price Competition," Economics Series Working Papers 874, University of Oxford, Department of Economics.
    6. Johannes Johnen & David Ronayne, 2021. "The only Dance in Town: Unique Equilibrium in a Generalized Model of Price Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 595-614, September.
    7. Shahryar Gheibi, 2020. "Low-Cost-Driven Leadership: A Theory for Price Dispersion in Competitive Markets," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(1), pages 61-76, June.

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    More about this item

    Keywords

    Sales; Price Dispersion; Advertising; Clearinghouse; Heterogeneity;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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