Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data
Judith A. Chevalier
Yale School of Management; National Bureau of Economic Research (NBER)
Anil K. Kashyap
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Peter E. Rossi
University of California, Los Angeles (UCLA) - Anderson School of Management
NBER Working Paper No. w7981
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.
Number of Pages in PDF File: 65working papers series
Date posted: October 21, 2000
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