Why Does the Average Price of Tuna Fall During Lent?

Source: RePEc


For many products the average price paid by consumers falls during periods of high demand. We use information from a large supermarket chain to decompose the decrease in the average price into a substitution effect, due to an increase in the share of cheaper products, and a price reduction effect. We find that for almost all the products we study the substitution effect explains a large part of the decrease. We estimate demand for these products and show the price declines are consistent with a change in demand elasticity and the relative demand for different brands. Our findings are less consistent with "loss-leader" models of retail competition.

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Available from: Aviv Nevo, Oct 07, 2015
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    • "through advertised prices on items of high relative demand. However, Nevo and Hatzitaskos (2005) decompose the seasonal price paid reductions into substitution (to less expensive brands) and price reduction effects. They find that the substitution effects are the larger of the two, which is less consistent with the loss leader model. "
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    ABSTRACT: Previous research has demonstrated that benefit recipients decrease expenditures on, and consumption of, food throughout the benefit month. Using detailed grocery store scanner data, we ask two questions: whether cycling is due to a desire for variety that leads to within-month substitution across product quality, and whether cycling is driven by countercyclical retail pricing. We find that the decrease in food expenditures is largely driven by reductions in quantity, not quality, and that prices for foods purchased by benefit households vary pro-cyclically with demand, implying that households could save money by delaying their food purchases until later in the month. (JEL D12, I38)
    American Economic Journal Economic Policy 05/2010; 2(2):142-62. DOI:10.1257/pol.2.2.142
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    • "Our findings indicate that while supermarket chains carry a fairly homogeneous set of popular items (i.e., widely available, top-selling items), stores have different assortments of lowselling products. To simplify the analysis, researchers commonly exclude low-selling items when estimating demand (e.g., Chintagunta 2002, Nevo and Hatzitaskos 2005). The fact that low-selling items often have low product availability is obviously immaterial when such products are excluded from the data sample. "
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    ABSTRACT: Aggregate demand models typically assume that consumers choose between all available products. Since consumers may be unwilling to search across every store in a given market for a particular item, this assumption is problematic when product assortments vary across stores. Using supermarket scanner data for five product categories we demonstrate that approximately one third of products have limited retail distribution, which account for one fourth of dollar sales. Monte Carlo analysis demonstrates that the level of limited product availability observed in the data can significantly bias the results of aggregate demand models that incorrectly assume all consumers in a given market face the same choice set.
    International Journal of Industrial Organization 02/2008; 26(4):984-997. DOI:10.1016/j.ijindorg.2007.09.001 · 0.84 Impact Factor
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