Why Does the Average Price of Tuna Fall During Lent?

Abstract

For many products the average price paid by consumers falls during periods of high demand.We use information from a large supermarket chain to decompose the decrease in the average price into a substitution effect, due to an increase in the share of cheaper products, and a price reduction effect.We find that for almost all the products we study the substitution effect explains a large part of the decrease.We estimate demand for these products and show the price declines are consistent with a change in demand elasticity and the relative demand for different brands.Our findings are less consistent with "loss-leader" models of retail competition.

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