Department of Economics and Business - Universitat Pompeu Fabra

Title:: A generalized model of sales
Authors:: Sandro Shelegia and Chris M. Wilson
Date:: October 2016
Abstract:: To provide a more exible workhorse model of temporary price reductions or "sales", this paper presents a substantially generalized "clearinghouse" sales framework. Our framework permits multiple dimensions of firm heterogeneity, and views firms as competing directly in utility rather than prices. The paper i) reproduces and extends many equilibria from the existing literature, ii) offers a range of new results on how firm heterogeneity affects market outcomes, iii) provides original insights into the number and type of firms that use sales, and iv) extends a "cleaning" procedure that is commonly used in empirical studies of sales and price dispersion.
Keywords:: Sales; Price Dispersion; Advertising; Clearinghouse; Heterogeneity.
JEL codes:: L13; D43; M3
Area of Research:: Business Economics and Industrial Organization

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