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Working Paper
Price Setting with Customer Capital: Sales, Teasers, and Rigidity
This paper studies price setting in an equilibrium search model of frictional product markets with long-term customer relationships. The theory gives rise to temporary sales when pricing is constrained to be anonymous across a firm’s customer base. Equilibrium prices are inefficiently high, giving rise to overselling and excess trade, and the emergence of sale pricing can improve allocations by limiting this overselling. Pricing is also characterized by an asymmetry involving a stable regular price and variable sale price when firms face idiosyncratic shocks. Absent anonymous pricing, the ...
Working Paper
Sellin’ in the Rain: Adaptation to Weather and Climate in the Retail Sector
Using novel methodology and proprietary daily store-level sporting goods and apparel brand data, I find that, consistent with long-run adaptation to climate, sales sensitivity to weather declines with historical norms and variability of weather. Short-run adaptation to weather shocks is dominated by changes in what people buy and how they buy it, with little intertemporal substitution. Over four weeks, a one-standard deviation one-day weather shock shifts sales by about 10 percent. While switching between indoor and outdoor stores offsets a small portion of contemporaneous responses to ...