Discussion paper
DP14113 A Generalized Model of Advertised Sales
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 firms as competing in utility and amending the conventional tie-break rule, we allow for multiple dimensions of firm heterogeneity in complex market environments. Moreover, we i) provide original insights into the number and types of firms that use sales, ii) offer new results on how firm heterogeneity affects market outcomes, iii) extend a common empirical ‘cleaning’ procedure, and iv) analyze a family of activities in sales markets, including persuasive advertising and obfuscation.
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