To better understand temporary price reductions or "sales," this paper presents a generalized "clearinghouse" framework of advertised sales and explores some applications. By viewing the firms as competing in utility and amending the conventional tiebreak 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.
Shelegia, Sandro, and Chris M. Wilson.
"A Generalized Model of Advertised Sales."
American Economic Journal: Microeconomics,
Firm Behavior: Theory
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Oligopoly and Other Imperfect Markets
Firm Performance: Size, Diversification, and Scope