Why Does the Average Price Paid Fall During High Demand Periods?

Aviv Nevo, Konstantinos Hatzitaskos

Research output: Working paper

Abstract

For many products the average price paid by consumers falls during periods of high demand. We use information from a large supermarket chain to decompose the decrease in the average price into a substitution effect, due to an increase in the share of cheaper products, and a price reduction effect. We find that for almost all the products we study the substitution effect explains a large part of the decrease. We estimate demand for these products and show the price declines are consistent with a change in demand elasticity and the relative demand for different brands. Our findings suggest, that for the data we examine, loss-leader models of retail competition are not the main explanation for price declines.
Original languageEnglish (US)
Number of pages26
StatePublished - Jul 2006

Fingerprint Dive into the research topics of 'Why Does the Average Price Paid Fall During High Demand Periods?'. Together they form a unique fingerprint.

Cite this