Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data

Judith A. Chevalier; Anil Kashyap; Peter E. Rossi

doi:10.1257/000282803321455142

American Economic Review Vol. 93 No. 1 2003

Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data

Judith A. Chevalier¹; Anil Kashyap²; Peter E. Rossi³

¹ School of Management, Yale University, 135 Prospect Street, New Haven, CT 06520, and National Bureau of Economic Research. · ² Graduate School of Business, University of Chicago, 1101 East 58th Street, Chicago, IL 60637, Federal Reserve Bank of Chicago, and National Bureau of Economic Research. · ³ Graduate School of Business, University of Chicago, 1101 East 58th Street, Chicago, IL 60637.

Abstract

We examine retail and wholesale prices for a large supermarket chain over seven and one-half years. We find that prices fall on average during seasonal demand peaks for a product, largely due to changes in retail margins. Retail margins for specific goods fall during peak demand periods for that good, even if these periods do not coincide with aggregate demand peaks for the retailer. This is consistent with “loss-leader” models of retailer competition. Models stressing cyclical demand elasticities or cyclical firm conduct are less consistent with our findings. Manufacturer behavior plays a limited role in the countercyclicality of prices.

DOI: 10.1257/000282803321455142
Volume: 93
Issue: 1
Pages: 15-37
Language: en
Sources: bibtex:phds-export.bib crossref openalex

Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data

Abstract

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