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

65 Pages Posted: 21 Oct 2000 Last revised: 5 Oct 2001

See all articles by Judith A. Chevalier

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

Peter E. Rossi

University of California, Los Angeles (UCLA) - Anderson School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: October 2000

Abstract

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.

Suggested Citation

Chevalier, Judith A. and Kashyap, Anil K. and Rossi, Peter E., Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data (October 2000). NBER Working Paper No. w7981. Available at SSRN: https://ssrn.com/abstract=246883

Judith A. Chevalier (Contact Author)

Yale School of Management ( email )

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National Bureau of Economic Research (NBER)

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Anil K. Kashyap

University of Chicago, Booth School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Federal Reserve Bank of Chicago ( email )

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Peter E. Rossi

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

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United States
773-294-8616 (Phone)

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