Rivalry in Price and Variety Among Supermarket Retailers
Timothy J. Richards
Arizona State University (ASU) - Morrison School of Agribusiness and Resource Management
Stephen F Hamilton
California State Polytechnic University, San Luis Obispo
American Journal of Agricultural Economics, Vol. 88, No. 3, pp. 710-726, August 2006
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.
Accepted Paper Series
Date posted: July 20, 2006
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