The Periodicity of Pricing

  • Bronnenberg B
  • Mela C
  • Boulding W
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Retail pricing data combine multiple decisions (e.g., regular pricing and discounting) that are possibly made by multiple decision makers (e.g., retailers and manufacturers). For example, temporary price reductions (high-frequency price changes) can be used to price discriminate in the short run, whereas regular price adjustments (low-frequency price changes) might reflect changes in long-term costs or demand. Time disaggregation cannot disentangle these factors, because frequency aggregation exists even when data are analyzed at the lowest possible level of temporal aggregation. Because little is known about the nature of pricing interactions across various planning cycles, this article develops several empirical generalizations about the role of periodicity in pricing. Using week–store stockkeeping-unit-level price data in 35 grocery categories, the authors find that (1) cross-brand correlation in prices occurs at multiple planning horizons, and the planning horizon of the predominant interaction does not typically coincide with the sampling rate of the data; (2) aggregating pricing interactions across frequencies obscures distinct and different interactions; (3) pricing interactions are related to category- and brand-specific factors, such as mean interpurchase times; (4) regular price changes explain most of the variation in prices; and (5) periodicity can affect inferences about the nature of competition within a category. The authors conclude by discussing several practical marketing applications for which marketing decisions across frequencies have relevance.

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  • Bart J. Bronnenberg

  • Carl F. Mela

  • William Boulding

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