DP14113 A Generalized Model of Advertised Sales

Author(s): Sandro Shelegia, Christopher Wilson
Publication Date: November 2019
Keyword(s): advertising, Clearinghouse, Heterogeneity, price dispersion, Sales
JEL(s): D43, L13, M3
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14113

To better understand temporary price reductions or 'sales', this paper presents a generalized 'clearinghouse' framework of advertised sales and explores some example applications. By viewing the fi?rms as competing in utility and amending the conventional tie-break rule, we allow for multiple dimensions of fi?rm heterogeneity in complex market environments. Moreover, we i) provide original insights into the number and types of fi?rms that use sales, ii)offer new results on how fi?rm heterogeneityaffects market outcomes, iii) extend a common empirical 'cleaning' procedure, and iv) analyze a family of activities in sales markets, including persuasive advertising and obfuscation.