Timing of Seasonal Sales

Pascal Courty, Li NMI2 Hao
1998 Social Science Research Network  
W e p r esent a model of timing of seasonal sales where s tores choose several designs at the beginning o f t h e s eason without knowing w h ich one, if any, will be fashionable. Fashionable designs h a v e a c h ance to fetch h igh prices in fashion markets while non-fashionable ones must b e s o l d i n a discount market. In the beginning of the season, stores charge high p rices in the hope of capturing their fashion market. As the end of the season approaches with goods still on the
more » ... , s tores adjust downward their expectations that t h ey are carrying a fashionable design, and may h a v e sales to capture the discount market. Having a greater number of designs induces a store to put one o f t h em on sales earlier to test the market. Moreover, p r ice competition in the discount m arket induces stores to start s a les earlier because of a greater perceived rst-mover advantage in capturing the discount m arket. More competition, perhaps d ue to decreases in the cost of product innovation, makes sales occur even earlier. These results are consistent with the observation that the trend t o w ard earlier sales since mid-1970's coincides with increasing product varieties in fashion good markets and increasing store competition. Acknowledgements: W e a re grateful for the comments made by P eter Pashigian, Steve Salant, the Editor and anonymous referee, and seminar participants at Universitat Pompeu Fabra a
doi:10.2139/ssrn.95435 fatcat:fweba7y7ezb3zdikks22pzmkpa