Rivalry in Price and Variety among Supermarket Retailers

Recent theoretical models of retail competition suggest that product heterogeneity is critical to retail price and variety strategies. This article provides empirical evidence on supermarket retailers' price and variety strategies using a nested constant elasticity of substitution (NCES) modeli...

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Bibliographic Details
Published in:American journal of agricultural economics 2006-08, Vol.88 (3), p.710-726
Main Authors: Richards, Timothy J., Hamilton, Stephen F.
Format: Article
Language:English
Subjects:
Agricultural economics
Agricultural products
Brands
Category management
Chain stores
Competition
Consumers
Cost estimates
Economic competition
Economic models
Economic statistics
Economic theory
Equilibrium
Food prices
Fruits
Game theory
Grocery stores
L110
L130
L810
Market prices
Market share
Market shares
Marketing
Monopolistic competition
nested CES
price competition
Price elasticity
Pricing policies
Product development
Product lines
Retail stores
Retail trade
retailing
Retailing industry
Shopping
Studies
Supermarkets
U.S.A
variety
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Summary:Recent theoretical models of retail competition suggest that product heterogeneity is critical to retail price and variety strategies. This article provides empirical evidence on supermarket retailers' price and variety strategies using a nested constant elasticity of substitution (NCES) modeling framework. The model is estimated using chain-level scanner data for four major grocery chains in a large, urban West Coast market. The results show that retailers compete for market share using both price and variety. While they all tend to follow moderately cooperative pricing strategies, the extent to which they follow cooperative strategies in variety is less homogeneous.
ISSN:0002-9092
1467-8276
DOI:10.1111/j.1467-8276.2006.00890.x