"Why Do Retail Prices Fall During Seasonal Demand Peaks?"

With Daniel W. Sacks and Boyoung Seo.

Kelley School of Business Research Paper, No. 19-21.

May 2023. 

Abstract: Examining widely-sold products across dozens of categories in a national scanner database, we find seasonality in demand is large--20 log points for the median category, and pervasive.  At seasonal frequencies, price fluctuations are typically countercyclical but small--1.5 log points on average. For most categories, we find seasonality in demand is driven by extensive margin changes in households purchasing any product in the category, and coincides with demand becoming more elastic as it peaks. These patterns suggest countercyclical pricing can be accounted for by demand-side factors instead of requiring supply-side explanations, or cross-category pricing motives (e.g., "loss leader").

The most recent version of the working paper is available as a pdf. (77 pages, 1.9 MB)

A full list of papers in the Kelley School of Business Research Paper series go here.