PRICE DISPERSION AND DEMAND UNCERTAINTY: EVIDENCE FROM US SCANNER DATA

Benjamin Eden ()

No 16-00015, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: I use the Prescott (1975) hotels model to explain variations in price dispersion across items sold by supermarkets in Chicago. The effect of demand uncertainty on price dispersion is highly significant and quantitatively important: My estimates suggest that more than 40% of the cross sectional standard deviation of log prices is due to demand uncertainty. I also find that price dispersion measures are negatively correlated with the average price but are not negatively correlated with the revenues from selling the good (across stores and weeks) and with the number of stores that sell the good. Temporary sales are modeled as a reaction to "unwanted inventories" that are accumulated when the realization of demand is low. The effect of demand uncertainty on the frequency of temporary sales is also highly significant and quantitatively important: Items with more demand uncertainty tend to accumulate "unwanted inventories" more often and tend to have temporary sales more often.

Keywords: Price Dispersion; Demand Uncertainty; Sequential Trade; temporary sales. (search for similar items in EconPapers)
JEL-codes: D4 E3 (search for similar items in EconPapers)
Date: 2016-08-04
New Economics Papers: this item is included in nep-agr, nep-com, nep-cse and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/pubs/VUECON/VUECON-16-00015.pdf (application/pdf)

Related works:
Working Paper: Price Dispersion and Demand Uncertainty: Evidence from US Scanner Data (2015)
Working Paper: Price dispersion and demand uncertainty: Evidence from US scanner data (2014)
Working Paper: PRICE DISPERSION AND DEMAND UNCERTAINTY: EVIDENCE FROM US SCANNER DATA (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-16-00015

Access Statistics for this paper

More papers in Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by John P. Conley ().