Paper #331

Títol:

Timing of seasonal sales

Autors:

Pascal Courty i Li Hao

Data:

Novembre 1998

Resum:

We present a model of timing of seasonal sales where stores choose several designs at the beginning of the season without knowing wich one, if any, will be fashionable. Fashionable designs have a chance to fetch high prices in fashion markets while non-fashionable ones must be sold in a discount market. In the beginning of the season, stores charge high prices in the hope of capturing their fashion market. As the end of the season approaches with goods still on the shelves, stores adjust downward their expectations that they are carrying a fashionable design, and may have sales to capture the discount market. Having a greater number of designs induces a store to put one of them on sales earlier to test the market. Moreover, price competition in the discount market induces stores to start sales earlier because of a greater perceived first-mover advantage in capturing the discount market. More competition, perhaps due to decreases in the cost of product innovation, makes sales occur even earlier. These results are consistent with the observation that the trend toward earlier sales since mid-1970's coincides with increasing product varieties in fashion good markets and increasing store competition.

Paraules clau:

Seasonal sales, clearance sales, pricing policies, competitive pricing

Codis JEL:

D40, L10

Àrea de Recerca:

Economia de l'Empresa i Organització Industrial

Publicat a:

Journal of Business October 1999

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