ABSTRACT FOR Ph.D. Dissertation - Kurt Jetta, Ph.D.
Fordham University, Department of Economics
A GENERAL THEORY OF RETAILER PRICE PROMOTION USING MICROECONOMIC FOUNDATIONS: IT’S ALL INCREMENTAL
This dissertation offers a Theory of Retailer Price Promotions. Specifically, the theory states that incremental retail sales generated by these promotions are entirely incremental to the retailer and the promoting manufacturer: there is no post-period reduction in sales (“dip”) either in the short or long-term, nor is there a reduction in sales from competing brands, nor is there a reduction of sales for the promoted item in competing retailers. To test this theory, the paper will be divided into several sections. First, there will be a discussion and a proof that aggregated point-of-sale data at the chain level is an easier, cheaper and more extendable method of analyzing sales promotions with almost no tradeoff in accuracy of model parameters. Second, using aggregate data, a more accurate and robust baseline model (sales in the absence of price promotion) will be developed that will be used as the measure to detect postperiod sales effects. Third there will be a demonstration with several empirical examples of the in-market effect of retailer price promotions with significant and sustained price discounts and no detectable reduction in post-period baseline sales. Finally, the paper will demonstrate that these empirical findings, as well as the general theory, are consistent with the microeconomic foundations of consumer demand theory.
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