research-article

Decision Stages and Asymmetries in Regular Retail Price Pass-Through

Authors: Blakeley B. McShane, Chaoqun Chen, Eric T. Anderson, Duncan I. SimesterAuthors Info & Claims

Marketing Science, Volume 35, Issue 4

Pages 619 - 639

https://doi.org/10.1287/mksc.2015.0947

Published: 01 July 2016 Publication History

Abstract

We study the pass-through of wholesale price changes onto regular retail prices using an unusually detailed data set obtained from a major retailer. We model pass-through as a two-stage decision process that reflects both whether as well as how much to change the regular retail price. We show that pass-through is strongly asymmetric with respect to wholesale price increases versus decreases. Wholesale price increases are passed through to regular retail prices 70% of the time while wholesale price decreases are passed through only 9% of the time. Pass-through is also asymmetric with respect to the magnitude of the wholesale price change, with the magnitude affecting the response to wholesale price increases but not decreases. Finally, we show that covariates such as private label versus national brand, 99-cent price endings, and the time since the last wholesale price change have a much stronger impact on the first stage of the decision process (i.e., whether to change the regular retail price) than on the second stage (i.e., how much to change the regular retail price).

Data, as supplemental material, are available at https://doi.org/10.1287/mksc.2015.0947.

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Cited By

Hu HZheng QPan X(2022)Agency or Wholesale? The Role of Retail Pass-ThroughManagement Science10.1287/mnsc.2021.426268:10(7538-7554)Online publication date: 1-Oct-2022
https://dl.acm.org/doi/10.1287/mnsc.2021.4262
Aparicio DSimester D(2022)Price Frictions and the Success of New ProductsMarketing Science10.1287/mksc.2022.136741:6(1057-1073)Online publication date: 1-Nov-2022
https://dl.acm.org/doi/10.1287/mksc.2022.1367

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Copyright © 2016, INFORMS.

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INFORMS

Linthicum, MD, United States

Publication History

Published: 01 July 2016

Accepted: 09 June 2015

Received: 05 July 2013

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Cited By

Hu HZheng QPan X(2022)Agency or Wholesale? The Role of Retail Pass-ThroughManagement Science10.1287/mnsc.2021.426268:10(7538-7554)Online publication date: 1-Oct-2022
https://dl.acm.org/doi/10.1287/mnsc.2021.4262
Aparicio DSimester D(2022)Price Frictions and the Success of New ProductsMarketing Science10.1287/mksc.2022.136741:6(1057-1073)Online publication date: 1-Nov-2022
https://dl.acm.org/doi/10.1287/mksc.2022.1367

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