The paper tests various predictions of the sale theory literature, using the retailer specific price data in Hungary. Besides being set in a New Member State, characterised by rather different history of retailing than the established market economies, one of the main innovations of this paper is the comparative assessment of price promotions of two homogenous, every-day products different only with respect to their perishability: one litre boxed and one litre durable fluid milk. Using a battery of empirical techniques from the simple summary statistics, the distribution analysis to the discrete choice models and the co-integration, there is concluded that competing theory predictions on price distributions are not accepted. Also the Hypothesis that manufacturers determine timing of sales is rejected. The results do not confirm that durable goods should have a qualitatively different pricing pattern than perishable products. When the temporal order of sales is considered, the estimations support the Hypothesis of alternate sales. In sum, the predictions of the existing retail sales models only partly confirm certain empirical aspects of price promotions.
Allender William J., Richards Timothy J. (2012): Brand Loyalty and Price Promotion Strategies: An Empirical Analysis. Journal of Retailing, 88, 323-342 https://doi.org/10.1016/j.jretai.2012.01.001
Bell D.R., Hilber C.A.L. (2006): An empirical test of the theory of sales: do household storage constraints affect consumer and store behavior? Quantitative Marketing and Economics, 4: 87–117.
Berck Peter, Brown Jennifer, Perloff Jeffrey M., Villas-Boas Sofia Berto (2008): Sales: Tests of theories on causality and timing. International Journal of Industrial Organization, 26, 1257-1273 https://doi.org/10.1016/j.ijindorg.2007.12.007
Carman Hoy F., Sexton Richard J. (2005): Supermarket fluid milk pricing practices in the western United States. Agribusiness, 21, 509-530 https://doi.org/10.1002/agr.20062
Chevalier Judith A, Kashyap Anil K, Rossi Peter E (2003): Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data. American Economic Review, 93, 15-37 https://doi.org/10.1257/000282803321455142
Conlisk John, Gerstner Eitan, Sobel Joel (1984): Cyclic Pricing by a Durable Goods Monopolist. The Quarterly Journal of Economics, 99, 489- https://doi.org/10.2307/1885961
Dutta S., Bergen M., Levy D. (2002): Price flexibility in channels of distribution: Evidence from scanner data. Journal of Economic Dynamics & Control, 26: 1845–1900.
Eichenbaum M., Jaimovich N., Rebelo S. (2008): Reference Prices and Nominal Rigidities. Working Paper No. 13829, National Bureau of Economic Research, Cambridge. Available at http://www.nber.org/papers/w13829
Gvillo R.M., Capps O. Jr., Dharmasena S. (2014): Dynamics of Advertising and Demand for Fluid Milk in the United States: An Incomplete Demand Approach. Selected Paper prepared for presentation at the Agricultural & Applied Economics Association’s 2014 AAEA Annual Meeting, Minneapolis, MN, July 27–29, 2014.
Hosken Daniel, Reiffen David (2004): Patterns of Retail Price Variation. The RAND Journal of Economics, 35, 128- https://doi.org/10.2307/1593733
Lal Rajiv (1990): Price Promotions: Limiting Competitive Encroachment. Marketing Science, 9, 247-262 https://doi.org/10.1287/mksc.9.3.247
Lal Rajiv, Villas-Boas J. Miguel (1998): Price Promotions and Trade Deals with Multiproduct Retailers. Management Science, 44, 935-949 https://doi.org/10.1287/mnsc.44.7.935
Li L., Carman H.F., Sexton R. (2005): Grocery Retailer Pricing Behaviour for California Avocados with Implications for Industry Promotion Strategies. In: American Agricultural Economics Association Annual Meeting, Providence, Rhode Island, July 24–27, 2005.
Lloyd T., Morgan C.W., McCorriston S., Zgovu E. (2009): Do Sales Matter? An Exploration of Price Discounting in UK Food Retailing. In: International Association of Agricultural Economists Conference, Beijing, China, August 16–22, 2009. Available at http://ageconsearch.umn.edu/bitstream/51572/2/IAAE%20Final.pdf
MacDonald J. (2000): Demand, information, and competition: why do food prices fall at seasonal demand peaks? Journal of Industrial Economics, 48: 27–45.
MacKinnon James G., Haug Alfred A., Michelis Leo (1999): Numerical distribution functions of likelihood ratio tests for cointegration. Journal of Applied Econometrics, 14, 563-577 https://doi.org/10.1002/(SICI)1099-1255(199909/10)14:5<563::AID-JAE530>3.0.CO;2-R
Maddala G.S., Kim I.-M. (1998): Unit Roots, Cointegration, and Structural Change. Cambridge University Press.
Pesendorfer Martin (2002): Retail Sales: A Study of Pricing Behavior in Supermarkets. The Journal of Business, 75, 33-66 https://doi.org/10.1086/323504
Salop Steven (1977): The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination. The Review of Economic Studies, 44, 393- https://doi.org/10.2307/2296898
Salop S.C., Stiglitz J.E. (1982): The theory of sales: a simple model of equilibrium price dispersion with identical agents. American Economic Review, 72: 1121–1130.
Seiler Stephan (2013): The impact of search costs on consumer behavior: A dynamic approach. Quantitative Marketing and Economics, 11, 155-203 https://doi.org/10.1007/s11129-012-9126-7
Shilony Yuval (1977): Mixed pricing in oligopoly. Journal of Economic Theory, 14, 373-388 https://doi.org/10.1016/0022-0531(77)90137-5
Sobel Joel (1984): The Timing of Sales. The Review of Economic Studies, 51, 353- https://doi.org/10.2307/2297428
Stokey Nancy L. (1979): Intertemporal Price Discrimination. The Quarterly Journal of Economics, 93, 355- https://doi.org/10.2307/1883163
Stokey Nancy L. (1981): Rational Expectations and Durable Goods Pricing. The Bell Journal of Economics, 12, 112- https://doi.org/10.2307/3003511
Tikkanen I. (2015): Measuring Effectiveness of a Milk Information and Promotion Programme in Finland. University of Eastern Finland, Business School, Kuopio. Available at http://www.saunalahti.fi/irmtikka/MilkPromProgrammeEffect09022015.pdf
Varian H. (1980): A model of sales. American Economic Review, 70: 651–659.
Villas-Boas J. Miguel (1995): Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets. Journal of Economics <html_ent glyph="@amp;" ascii="&"/> Management Strategy, 4, 85-107 https://doi.org/10.1111/j.1430-9134.1995.00085.x
VILLAS-BOAS SOFIA BERTO (2007): Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data. Review of Economic Studies, 74, 625-652 https://doi.org/10.1111/j.1467-937X.2007.00433.x