Working Paper: CEPR ID: DP10725
Authors: Etienne Gagnon; David López-Salido
Abstract: We study the pricing response of U.S. supermarkets to large demand shocks triggered by labor conflicts, mass population relocation, and shopping sprees around major snowstorms and hurricanes. We find that these large swings in demand have, at best, modest effects on the level of retail prices, consistent with flat short- to medium-term supply curves. This finding holds even when shocks are highly persistent and even though stores adjust prices frequently. We also uncover evidence that retailers with radically different demand shocks nonetheless seek to match their local competitors' pricing movements and recourse to sales and promotions.
Keywords: demand shocks; inflation; labor conflicts; mass population displacement; sales; severe weather events
JEL Codes: E30; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Demand variation (C69) | Retail prices (P22) |
| Labor conflicts (J52) | Sales volumes (G10) |
| Labor conflicts (J52) | Retail prices (P22) |
| Hurricane Katrina (H84) | Retail prices (P22) |
| Demand shocks (E39) | Pricing strategies (D49) |
| Consumer loyalty and strategic pricing (D49) | Retail prices (P22) |