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

64 Pages Posted: 10 Sep 2002  

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

Multiple version iconThere are 2 versions of this paper

Date Written: July 2002

Abstract

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.

Keywords: Pricing, Seasonality, Retail, Competition

JEL Classification: L13, E32, L81

Suggested Citation

Rossi , Peter E. and Chevalier, Judith A. and Kashyap, Anil K., Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data (July 2002). Yale SOM Working Paper No. MK-12. Available at SSRN: https://ssrn.com/abstract=319966 or http://dx.doi.org/10.2139/ssrn.319966

Peter E. Rossi (Contact Author)

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

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Judith A. Chevalier

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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