Informational rigidities and the stickiness of temporary Sales

Eric Anderson; Benjamin A. Malin; Emi Nakamura; Duncan Simester; Jón Steinsson

doi:10.1016/j.jmoneco.2017.06.003

Informational rigidities and the stickiness of temporary Sales

Eric Anderson, Benjamin A. Malin, Emi Nakamura^*, Duncan Simester, Jón Steinsson

^*Corresponding author for this work

Marketing

Research output: Contribution to journal › Article › peer-review

34 Scopus citations

Abstract

How do retailers react to cost changes? While temporary sales account for 95% of price change in our data, retail prices respond to a wholesale cost increase entirely through the regular price. Sales actually respond temporarily in the opposite direction from regular prices, as though to conceal the price hike. Additional evidence from responses to commodity cost and local unemployment shocks, as well as broader evidence from BLS data, reinforces these findings. Institutional evidence indicates that sales are complex contingent contracts, determined substantially in advance. In a standard price-discrimination model, these institutional practices leave little money ``on the table”.

Original language	English (US)
Pages (from-to)	64-83
Number of pages	20
Journal	Journal of Monetary Economics
Volume	90
DOIs	https://doi.org/10.1016/j.jmoneco.2017.06.003
State	Published - Oct 2017

Keywords

Inflation dynamics
Temporary sales
Trade deals

ASJC Scopus subject areas

Finance
Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jmoneco.2017.06.003

Cite this

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title = "Informational rigidities and the stickiness of temporary Sales",

abstract = "How do retailers react to cost changes? While temporary sales account for 95% of price change in our data, retail prices respond to a wholesale cost increase entirely through the regular price. Sales actually respond temporarily in the opposite direction from regular prices, as though to conceal the price hike. Additional evidence from responses to commodity cost and local unemployment shocks, as well as broader evidence from BLS data, reinforces these findings. Institutional evidence indicates that sales are complex contingent contracts, determined substantially in advance. In a standard price-discrimination model, these institutional practices leave little money ``on the table”.",

keywords = "Inflation dynamics, Temporary sales, Trade deals",

author = "Eric Anderson and Malin, {Benjamin A.} and Emi Nakamura and Duncan Simester and J{\'o}n Steinsson",

note = "Publisher Copyright: {\textcopyright} 2017 Elsevier B.V.",

year = "2017",

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doi = "10.1016/j.jmoneco.2017.06.003",

language = "English (US)",

volume = "90",

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AU - Malin, Benjamin A.

AU - Nakamura, Emi

AU - Simester, Duncan

AU - Steinsson, Jón

PY - 2017/10

Y1 - 2017/10

N2 - How do retailers react to cost changes? While temporary sales account for 95% of price change in our data, retail prices respond to a wholesale cost increase entirely through the regular price. Sales actually respond temporarily in the opposite direction from regular prices, as though to conceal the price hike. Additional evidence from responses to commodity cost and local unemployment shocks, as well as broader evidence from BLS data, reinforces these findings. Institutional evidence indicates that sales are complex contingent contracts, determined substantially in advance. In a standard price-discrimination model, these institutional practices leave little money ``on the table”.

AB - How do retailers react to cost changes? While temporary sales account for 95% of price change in our data, retail prices respond to a wholesale cost increase entirely through the regular price. Sales actually respond temporarily in the opposite direction from regular prices, as though to conceal the price hike. Additional evidence from responses to commodity cost and local unemployment shocks, as well as broader evidence from BLS data, reinforces these findings. Institutional evidence indicates that sales are complex contingent contracts, determined substantially in advance. In a standard price-discrimination model, these institutional practices leave little money ``on the table”.

KW - Inflation dynamics

KW - Temporary sales

KW - Trade deals

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VL - 90

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EP - 83

JO - Journal of Monetary Economics

JF - Journal of Monetary Economics

ER -

Informational rigidities and the stickiness of temporary Sales

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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