Micro-Responses to Shocks: Pricing, Promotion, and Entry

37 Pages Posted: 29 Oct 2018 Last revised: 7 Oct 2019

See all articles by Alexis Antoniades

Alexis Antoniades

Georgetown University School of Foreign Service in Qatar

Sofronis Clerides

University of Cyprus; Centre for Economic Policy Research (CEPR); University of Bologna - Rimini Center for Economic Analysis (RCEA)

Mingzhi Xu

Peking University - Institute of New Structural Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2018

Abstract

We study the market response to firm-specific shocks in a natural experiment setting. In 2006, a boycott of Danish products in several Arab countries was devastating for Danish cheese products firms. In Saudi Arabia their market share collapsed from 16.5% in January to below 1% in March and never fully recovered: by 2009 it was 6.3%. By analyzing micro-level (scanner) price and sales data, we find that (i) Danish firms lowered prices but kept the product mix the same; (ii) non-Danish firms kept prices constant but changed their product mix by introducing new products and new product bundles; and (iii) non-Danish firms chose to introduce products that were similar to the Danish in characteristic space in order to compete head-to-head. We complement the analysis with a theoretical framework that helps to account for our main findings.

Keywords: boycotts, demand shock, multi-product firms, Saudi Arabia

JEL Classification: L10

Suggested Citation

Antoniades, Alexis and Clerides, Sofronis and Xu, Mingzhi, Micro-Responses to Shocks: Pricing, Promotion, and Entry (October 2018). CEPR Discussion Paper No. DP13281, Available at SSRN: https://ssrn.com/abstract=3274624

Alexis Antoniades (Contact Author)

Georgetown University School of Foreign Service in Qatar ( email )

Education City
Al Huqoul St
Doha
Qatar

Sofronis Clerides

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357 2289 3709 (Phone)
+357 2289 5049 (Fax)

HOME PAGE: http://sofronis.clerides.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Mingzhi Xu

Peking University - Institute of New Structural Economics ( email )

Bejing, AK Bejing
China

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