What is the main idea behind this new research on pricing?

The core idea is that sales volume significantly influences price changes. Unlike traditional economic models, this research suggests that the more a product sells, the more likely it is to experience small price adjustments. This challenges the assumption that price changes are solely driven by factors like competition, production costs, or consumer demand. The new perspective highlights how the act of selling a lot of a particular item subtly influences its price management.

How does this new research challenge the traditional 'menu cost model' of pricing?

The 'menu cost model' suggests that businesses face a fixed cost each time they change a price, which leads to infrequent price adjustments. However, this research, by Doron Sayag, Avichai Snir, and Daniel Levy indicates that small price changes are more frequent for products with high sales volumes. This finding contradicts the idea that companies only make infrequent, large price changes to overcome menu costs. The study's data implies that frequent small price adjustments are common, especially for high-volume products, effectively challenging the 'menu cost model' as a complete explanation for price stickiness.

What data was used to support the findings about sales volume and price changes?

The researchers, Doron Sayag, Avichai Snir, and Daniel Levy, analyzed a detailed dataset from Dominick's, a large U.S. retail food chain. This dataset included over 98 million weekly observations across thousands of products. By examining this extensive data, the researchers were able to identify a clear pattern: small price changes were significantly more common for products with high sales volumes. This pattern held true across different product categories and even for individual products across different store locations, reinforcing the robustness of their findings.

What are the practical implications of understanding the link between sales volume and price changes for consumers and businesses?

For consumers, understanding the influence of sales volume can lead to more savvy shopping habits. Consumers can anticipate price fluctuations based on how popular a product is. For businesses, this knowledge can inform pricing strategies, allowing them to optimize revenue while staying competitive. Recognizing that high-volume products are more amenable to small price adjustments enables businesses to fine-tune their pricing strategies more effectively.

Beyond 'menu costs', are there other established economic theories that this research might refine or challenge regarding price stickiness and market dynamics?

Yes, beyond the 'menu cost model', this research by Doron Sayag, Avichai Snir, and Daniel Levy could refine our understanding of other concepts related to price stickiness. For example, theories about 'sticky information', where information about optimal prices doesn't immediately disseminate through the market, might need to incorporate the role of sales volume as a catalyst for price adjustment. Similarly, models that consider 'coordination failures', where firms hesitate to change prices due to uncertainty about competitors' actions, could be enhanced by understanding that high-volume products are more likely to experience price changes irrespective of competitor behavior. The interaction between sales volume and these established theories offers a richer, more nuanced view of market dynamics.

A giant price tag manipulated by tiny hands, symbolizing the influence of sales volume on pricing.

The Secret Life of Prices: How Sales Volume Quietly Dictates What You Pay

Avery Sinclair in Business & Economy December 2025 • 5 min read.

"New research reveals the hidden hand of sales volume in shaping price changes, offering a fresh perspective on why prices aren't always what they seem."

The world of retail pricing often seems like a chaotic landscape, with prices jumping up and down for reasons that aren't always clear. Economists have long grappled with understanding why prices don't simply adjust to reflect changing market conditions. One popular explanation, the menu cost model, suggests that businesses face a fixed cost each time they alter a price, leading to infrequent changes. However, this model struggles to account for the frequent small price adjustments we observe in everyday shopping.

A recent study sheds light on this puzzle, highlighting the overlooked role of sales volume in shaping price dynamics. Researchers Doron Sayag, Avichai Snir, and Daniel Levy from Bar-Ilan University and Emory University suggest that the frequency and magnitude of price adjustments are closely tied to how much of a product is being sold. Their findings, recently revised as of February 29, 2024, point towards a new understanding of how businesses strategically set prices in response to market forces.

This new perspective challenges the traditional view that price changes are solely driven by factors like competition, production costs, or consumer demand. Instead, it suggests that the simple act of selling a lot of a particular item can subtly influence how its price is managed. This article delves into the details of this research, exploring the implications for consumers, businesses, and the broader economy.

The Hidden Hand of Sales Volume: A New Pricing Model

A giant price tag manipulated by tiny hands, symbolizing the influence of sales volume on pricing.

The researchers argue that in a world where changing prices isn't free, the volume of sales becomes a critical factor. Imagine a store that sells a single unit of a niche item per week. The benefit of slightly increasing the price on that one unit might not outweigh the effort and cost of reprinting labels, updating inventory systems, and potentially irritating a customer. But what if the store sold thousands of units of a popular product each week? Suddenly, even a tiny price increase translates into a significant boost in overall revenue, making the change worthwhile.

Using a detailed dataset from Dominick's, a large U.S. retail food chain, the researchers analyzed over 98 million weekly observations across thousands of products. They discovered a clear pattern: small price changes were significantly more common for products with high sales volumes. This held true across different product categories, within product categories, and even for individual products across different store locations.

The study's key findings can be summarized as follows:|Small price changes are more frequent when products' sales volume is high: This is the core finding, supported by extensive data analysis.|The finding holds across product categories: Whether it's food, cleaning supplies, or personal care items, the relationship between sales volume and small price changes persists.|The finding is robust: The results held up even after accounting for factors like measurement errors, varying definitions of "small" price changes, and the inclusion of control variables for competition and production costs.

This challenges the traditional economic view that firms make infrequent but relatively large price changes to offset menu costs. The data suggests that the finding of small price changes in many retail price datasets is often viewed as a puzzle.

What This Means for You and the Future of Pricing

This research offers a valuable new lens through which to view the seemingly random world of pricing. By understanding the influence of sales volume, consumers can become more savvy shoppers, anticipating when prices are likely to fluctuate. For businesses, this knowledge can inform pricing strategies, helping them optimize revenue while remaining competitive. And for economists, it provides a more nuanced model for understanding the complexities of price stickiness and its impact on the overall economy.