What explains apparent price rigidity over the business cycle? This paper shows that price fluctuations may be hidden … procyclicality is driven by a shift in price setting behavior, where local stores use extended warranty discounts to make base … durable demand less price elastic and, as a result, increase sales of durable goods. Discounts on extended warranties were …

Previous studies have found that price promotions lead to a decrease in the average prices of seasonal goods in high … demand season, countering the predictions of basic supply and demand. I explain this trend by proposing that price …-sensitive consumers are less likely to search in low demand periods, changing consumer composition and decreasing aggregate price …