The Effect of Sales and Evidence from Micro Data

Zi-Yi Guo and Yangxiaoteng Luo

Research in World Economy, 2017, vol. 8, issue 1, 37-44

Abstract: The concept of menu cost indicates that firms are facing a fixed menu cost when they want to change the nominal prices. However, the standard menu cost model is hardly to explain the observed facts from micro-level data, especially in terms of sales. In this paper, we investigate the effect of sales through a novel product-level dataset. There are at least three findings from our estimation results. First, we find that retail sales themselves, rather than price decreases, have a large effect on consumers¡¯ purchases. Second, consumers are more prices sensitive when the product is on sale than they are when the product is not on sale. Third, consumers are far more aware of price decreases than price increases.

Keywords: menu costs; consumers purchases; Heckman two-step estimation (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:jfr:rwe111:v:8:y:2017:i:1:p:37-44

DOI: 10.5430/rwe.v8n1p37

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