Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data
Peter E. Rossi
University of California, Los Angeles (UCLA) - Anderson School of Management
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); Federal Reserve Bank of Chicago
Yale SOM Working Paper No. MK-12
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.
Number of Pages in PDF File: 64
Keywords: Pricing, Seasonality, Retail, Competition
JEL Classification: L13, E32, L81
Date posted: September 10, 2002
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