A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms

Rotemberg, Julio J.; Saloner, Garth

doi:10.3386/w1412

Cited by 611 publications

(769 citation statements)

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“…Fourth, retailers may conduct sales for strategic reasons, perhaps as trigger strategies designed to implicitly support a collusive oligopoly (Green and Porter 1984;Lal 1990) or out of a recognition that low prices now will invite relatively benign punishments from rivals (Rotemberg and Saloner 1986). Fifth, managers often regard price promotion as an essential part of introducing a new product (Bass 1980;Spatt 1981).…”

Section: Rationale For Price Promotionmentioning

confidence: 99%

Sales by multi-product retailers

Richards

2006

Manage. Decis. Econ.

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This paper examines the rationale underlying periodic price promotions, or sales, for perishable food products by supermarket retailers. Whereas previous studies explain sales in a single-product context as arising from informational, storage cost, or demand heterogeneity, this study focuses on the central role of retailers as multi-product sellers of complementary goods. By offering a larger number of discounted products within a particular category, retailers are able to attract a sufficient number of customers to offset the effect of lower margins on sale items by selling more high-margin items. The implications that emerge from the resulting mixed-strategy equilibrium are tested in a product-level, retail-scanner data set of fresh fruit sales. Hypotheses regarding the rationale and effectiveness of sales are tested by estimating econometric models that describe (1) the number of sales items per store, (2) the depth of a given sale, and (3) promotion effectiveness on store-level demand. The results of this econometric analysis support the hypothesis that the breadth and depth of price promotions are complementary marketing tools, thus explaining how EDLP and HI-LO store formats can exist in the same monopolistically competitive market equilibrium. Copyright © 2006 John Wiley & Sons, Ltd.

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Section: Rationale For Price Promotionmentioning

confidence: 99%

Sales by multi-product retailers

Richards

2006

Manage. Decis. Econ.

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“…In contrast to Rotemberg and Saloner (1986), a preventive reduction of prices is not triggered by demand shocks but by cost shocks.…”

Section: The Simulation Modelmentioning

confidence: 99%

Empirical methods in the analysis of collusion

Paha

2011

Empirica

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTRegression methods are commonly used in competition lawsuits for, e.g., determining overcharges in pricefixing cases. Technical evaluations of these methods' pros and cons are not necessarily intuitive. Appraisals that are based on case studies are descriptive but need not be universally valid. This paper opens up the black box called econometrics for competition cases. This is done by complementing theoretical arguments with estimation results. These results are obtained for data that is generated by a simulation-model of a collusive industry. Using such data leaves little room for debate about the quality of these methods because estimates of, e.g., overchargescan be compared to their true underlying values. This analysis provides arguments for demonstrating that thoroughly conducted econometric analyses yield better results than simple techniques such as before-and-after comparisons.

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“…Or, the best way forward may be to attempt to develop and employ parsimonious parameterizations in the spirit of the "conjectural variations" approach that can provide reliable reduced-form estimates of the location of conduct along "the in-between range of incomplete collusion." 13 Whatever approach proves most productive, there is simply not strong empirical support for the assumption that all market outcomes are well-modeled as noncollusive Nash equilibriaany more than there is support for the Rotemberg-Saloner (1986) vision of ubiquitous collusion. Accordingly, I believe it is critical for the progress of IO-as a field that is concerned with the real world-that empirical work should develop sound, broadly applicable methods to relax or test the single-period Nash assumption and that those methods be systematically applied to the Mason-NEIO agenda of constructing a mapping between market structure, broadly defined, and the nature and intensity of competition.…”

Section: Econometric Industry Studiesmentioning

confidence: 99%