An Empirical Test of Price Theories in the Market for Seasonal Goods

Posted: 30 Sep 2015

See all articles by Gonca Soysal

Gonca Soysal

University of Arkansas - Sam M. Walton College of Business; University of Texas at Dallas, Naveen Jindal School of Management

Pradeep K. Chintagunta

University of Chicago

Date Written: September 28, 2015

Abstract

Three theories have been proposed in the literature to describe the reason behind sharp price declines observed over a product's short lifecycle in seasonal (perishable) goods markets: Prices decline as a result of (i) inter-temporal price discrimination; (2) a firm's uncertainty about product popularity at the start of the season; (3) decreasing opportunity costs due to product perishability. We first provide empirically testable implications of each theory. Then, using data from a large US specialty apparel retailer, we assess whether these theories have empirical support in the fashion apparel market. Our results indicate that inter-temporal price discrimination and product perishability both contribute to the observed price declines. We do not find empirical support for the impact of retailer’s initial demand uncertainty on observed price declines in our data.

Keywords: Seasonal Goods, Dynamic Pricing, Inter-temporal Price Dscrimination, Demand Learning, Perishability, Retailing, Short life-cycle Goods

Suggested Citation

Soysal, Gonca and Chintagunta, Pradeep K., An Empirical Test of Price Theories in the Market for Seasonal Goods (September 28, 2015). Available at SSRN: https://ssrn.com/abstract=2666545 or http://dx.doi.org/10.2139/ssrn.2666545

Gonca Soysal (Contact Author)

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States

University of Texas at Dallas, Naveen Jindal School of Management ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Pradeep K. Chintagunta

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

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