A Generalized Model of Advertised Sales

Abstract

To better understand temporary price reductions or 'sales', this paper presents a generalized 'clearinghouse' framework of advertised sales and explores some example applications. By viewing the firms as competing in utility and amending the conventional tie-break rule, we allow for multiple dimensions of firm heterogeneity in complex market environments. Moreover, we i) provide original insights into the number and types of firms that use sales, ii)offer new results on how firm heterogeneityaffects market outcomes, iii) extend a common empirical 'cleaning' procedure, and iv) analyze a family of activities in sales markets, including persuasive advertising and obfuscation.

Keywords: advertising, Clearinghouse, Heterogeneity, price dispersion, Sales

JEL Classification: D43, L13, M3