Open AccessThe Effect of Sales and Evidence from Micro Data
Author(s) -
ZiYi Guo,
Yangxiaoteng Luo
Publication year - 2017
Publication title -
research in world economy
Language(s) - English
Resource type - Journals
eISSN - 1923-399X
pISSN - 1923-3981
DOI - 10.5430/rwe.v8n1p37
Subject(s) - product (mathematics) , business , commerce , retail sales , economics , microeconomics , industrial organization , econometrics , advertising , marketing , monetary economics , mathematics , geometry
The concept of menu cost indicates that firms are facing a fixed menu cost when they want to change the nominal prices. However, the standard menu cost model is hardly to explain the observed facts from micro-level data, especially in terms of sales. In this paper, we investigate the effect of sales through a novel product-level dataset. There are at least three findings from our estimation results. First, we find that retail sales themselves, rather than price decreases, have a large effect on consumers’ purchases. Second, consumers are more prices sensitive when the product is on sale than they are when the product is not on sale. Third, consumers are far more aware of price decreases than price increases.