Informational rigidities and the stickiness of temporary Sales

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

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 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 languageEnglish (US)
Pages (from-to)64-83
Number of pages20
JournalJournal of Monetary Economics
Volume90
DOIs
StatePublished - Oct 2017

Keywords

  • Inflation dynamics
  • Temporary sales
  • Trade deals

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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