Informational rigidities and the stickiness of temporary Sales

- Retail price response to wholesale price hikes is entirely through ``regular” price.
- Temporary discounts are often timed to coincide with regular price hikes.
- Institutionally, sales are complex contingent contracts, determined substantially in advance.

How do retailers react to cost changes? While temporary sales account for 95% of price change in our data, retail prices respond to a wholesale cost increase entirely through the regular price. Sales actually respond temporarily in the opposite direction from regular prices, as though to conceal the price hike. Additional evidence from responses to commodity cost and local unemployment shocks, as well as broader evidence from BLS data, reinforces these findings. Institutional evidence indicates that sales are complex contingent contracts, determined substantially in advance. In a standard price-discrimination model, these institutional practices leave little money ``on the table”.