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Abstract
In this paper we examine the empirical pattern of sales behaviour among the UK’s seven
largest retail chains using a scanner dataset of weekly food prices on over 500 products over
a 2.5 year period. Motivating the analysis is the question ’are products more likely to go
on sale that longer they remain unpromoted?’. Theory is not unanimous and empirical and
recent empirical studies also offer conflicting evidence. To address the question we estimate
the hazard rate of a sale - probability that a product goes on sale in the tth week since the
last sale - over the market as a whole and then separately across different national retailers.
We pay particular attention to the effects of sales in like-for-like products in rival retailers
on the hazard of a sale. We also find that accounting for multiple sales has a pivotal role
in determining the slope of the hazard function, which actually reverses sign when proper
account is taken of this seemingly innocuous technicality. Correcting for this we find that
food products are more likely to be discounted the longer they remain without a sale. This
result helps square the circle between price setting and modern theories of sales behaviour.
Furthermore, we find that the positive time-dependent pattern varies across product format
and brand status. With sales in rivals, branded products in a representative retailer are
more likely to be discounted if it has been on sale previously in the rival retailers, however
the hazard of a sale in private labels is unrelated to its rival sales. In the individual retailer
level, the hazard results show that while most supermarkets exhibit some form of a ’hi-lo’
pricing there is one retail chain does not (showing no time-dependence) preferring an every
day low pricing strategy (EDLP).