WHY DO SOME PRICES IN THE RETAIL SECTOR DROP WHEN DEMAND RISES? EVIDENCE FROM THE CHILEAN CASE

Loreto Lira ()
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Loreto Lira: Facultad de Ciencias Económicas y Empresariales, Universidad de los Andes.

Abante, 2007, vol. 10, issue 2, pages 151-168

Abstract: Internationally, the prices of retail products have been seen to drop during periods of exogenous increases in demand. The purpose of this paper is to study the generality of this stylized fact by investigating whether this behavior also takes place in Chile, through the monthly prices of a set of retail products with positive demand seasonality. The prices of some products show a drop during their peak idiosyncratic demand. Moreover, tha results are consistent with the loss leaders modeL, according to which prices are proactively reduced by retailers in order to attract buyers to stores.

Keywords: Retailing; Prices; Loss leaders; Chile (search for similar items in EconPapers)
JEL-codes: L81 L11 L21 (search for similar items in EconPapers)
Date: 2007
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