Retail Price Ripples
Xiao Ling, Sourav Ray, and Daniel Levy

TL;DR
This study analyzes a large retail dataset from 2006-2015 to reveal asymmetric pricing behaviors, showing small price increases are more common than decreases, with implications for consumer perception and retailer profits.
Contribution
It provides robust, large-scale evidence of asymmetric small price changes in retail, addressing previous data limitations and measurement concerns.
Findings
Small price increases outnumber decreases in the small change range.
Small price decreases outnumber increases, reversing the typical asymmetry.
Results are robust to measurement errors and data aggregation issues.
Abstract
Much like small ripples in a stream, which get lost in the larger waves, small changes in retail prices often fly under the radar of public perceptions, while large price changes appear as marketing moves associated with demand and competition. Unnoticed, these could increase consumers out of pocket expenses. Indeed, retailers could boost their profits by making numerous small price increases or by obfuscating large price increases with numerous small price decreases, thereby bypassing the consumers full attention and consideration, and triggering consumer fairness concerns. Yet only a handful of papers study small price changes. Extant results are often based on a single retailer, limited products, short time span, and legacy datasets dating back to the 1980s and 1990s, leaving their current practical relevance questionable. Researchers have also questioned whether the reported…
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Taxonomy
TopicsConsumer Market Behavior and Pricing · Digital Platforms and Economics · Merger and Competition Analysis
