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Price convergence in the UK supermarket chains: Evidence from nonlinear cointegration approach

Supermarket chain is an important sector of the UK grocery stores and the growing dominance of supermarket chains has brought public concern over exploitation of market power in the UK retail grocery industry. This paper therefore aims to examine the price convergence of the UK supermarket products....

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Bibliographic Details
Published in:Economics and business letters 2018-01, Vol.7 (3), p.115-125
Main Authors: Woo, Kai Yin, Lee, Shu Kam
Format: Article
Language:English
Online Access:Get full text
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Summary:Supermarket chain is an important sector of the UK grocery stores and the growing dominance of supermarket chains has brought public concern over exploitation of market power in the UK retail grocery industry. This paper therefore aims to examine the price convergence of the UK supermarket products. Since the cointegrating relationship between supermarket prices may not be exact or linear, we adopt the rank tests for analysis which do not require prior knowledge and specification of the linear or nonlinear functional form. Our results confirm the evidence of the price convergence of all grocery products and then validate the price competition between the UK supermarket chains. Furthermore, a subset of the cointegration relationships exhibits nonlinear long-run price co-movements.
ISSN:2254-4380
2254-4380
DOI:10.17811/ebl.7.3.2018.115-125