How do Everyday-Low-Price Supermarkets Adjust Their Prices?

Was the rapid increase and collapse of commodity prices in 2007–2009 passed through to supermarket prices symmetrically? This study is the first to address this issue for an everyday-low-price (EDLP) supermarket chain, which infrequently changes its prices and rarely has sales. We also reexamine the...

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Bibliographic Details
Published in:Review of industrial organization 2024-02, Vol.64 (1), p.117-146
Main Authors: He, Guojun, LaFrance, Jeffrey T., Perloff, Jeffrey M., Volpe, Richard
Format: Article
Language:English
Subjects:
Commodities
Commodity prices
Consumer Price Index
Consumers
Economics
Economics and Finance
Food
Gasoline prices
Grocery stores
Industrial Organization
Microeconomics
Rice
Sales
Supermarkets
Time series
Wholesale clubs
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Summary:Was the rapid increase and collapse of commodity prices in 2007–2009 passed through to supermarket prices symmetrically? This study is the first to address this issue for an everyday-low-price (EDLP) supermarket chain, which infrequently changes its prices and rarely has sales. We also reexamine the question for typical firms that set a usual high price and have frequent sales. We examine 25 goods that use a primary commodity (such as rice in a bag of rice). We fail to reject symmetric adjustments for very few goods for both types of stores. In addition, we find that the probability an EDLP chain adjusts its prices in response to even a large commodity price shock is low for most goods.
ISSN:0889-938X
1573-7160
DOI:10.1007/s11151-023-09922-0