Informational Rigidities and the Stickiness of Temporary Sales

Eric Anderson, Benjamin Malin, Emi Nakamura, Duncan Simester and Jon Steinsson

No 19350, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use unique price data to study how retailers react to underlying cost changes. Temporary sales account for 95% of price changes in our data. Simple models would, therefore, suggest that temporary sales play a central role in price responses to cost shocks. We find, however, that, in response to a wholesale cost increase, the entire increase in retail prices comes through regular price increases. 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. We present institutional evidence that sales are complex contingent contracts, determined substantially in advance. We show theoretically that these institutional practices leave little money “on the table”: in a price-discrimination model of sales, dynamically adjusting the size of sales yields only a tiny increase in profits.

JEL-codes: E30 L11 M30 (search for similar items in EconPapers)
Date: 2013-08
Note: EFG IO ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Eric Anderson & Benjamin A. Malin & Emi Nakamura & Duncan Simester & Jón Steinsson, 2017. "Informational rigidities and the stickiness of temporary Sales," Journal of Monetary Economics, vol 90, pages 64-83.

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Journal Article: Informational rigidities and the stickiness of temporary Sales (2017)
Working Paper: Informational Rigidities and the Stickiness of Temporary Sales (2015)
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