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Price Rigidity in the German Grocery-Retailing Sector: Scanner-Data Evidence on Magnitude and Causes

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  • Herrmann Roland

    (University of Giessen)

  • Moeser Anke

    (University of Giessen)

  • Weber Sascha Alexander

    (University of Giessen)

Abstract

The theoretical and empirical macroeconomic literature suggests that price rigidity in industrialized countries is substantial and its causes are manifold. This article provides empirical evidence on the importance of price rigidity in the grocery-retailing sector and on the role of some major determinants of food price rigidity. The analysis is based on a comprehensive weekly dataset of 20 branded foods in German food stores. The statistical analysis shows that food price rigidity is strong in spite of the widespread use of retail sales. Moreover, the importance of psychological pricing in grocery retailing is overwhelming. Econometric results indicate that food prices get more sticky as the number of price actions declines and as psychological pricing becomes more concentrated on a few important price barriers. Firms' pricing strategies are crucial for food price rigidity, too.

Suggested Citation

  • Herrmann Roland & Moeser Anke & Weber Sascha Alexander, 2005. "Price Rigidity in the German Grocery-Retailing Sector: Scanner-Data Evidence on Magnitude and Causes," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 3(1), pages 1-37, February.
    • Handle: RePEc:bpj:bjafio:v:3:y:2005:i:1:n:4
    DOI: 10.2202/1542-0485.1089
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    References listed on IDEAS

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    Cited by:

    1. Franz Sinabell & Ulrich B. Morawetz & Carsten Holst, 2014. "Auslandskomponente des Lebensmittelmarktes in Österreich," WIFO Studies, WIFO, number 50911, February.
    2. Möser, Anke & Kriep, Laura, 2014. "Bequeme Preise im Quickservice-Bereich," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 63(02), pages 1-13, June.
    3. Bocionek, Milena & Anders, Sven M., 2012. "Estimating Price Rigidity in Vertically Differentiated Food Product Categories with Private Labels," Staff Paper Series 139931, University of Alberta, Department of Resource Economics and Environmental Sociology.
    4. Sascha A. Weber & Sven M. Anders, 2007. "Price rigidity and market power in German retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 737-749.
    5. Möser, Anke & Kriep, Laura, 2014. "Bequeme Preise im Quickservice-Bereich," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(2).
    6. Möser, A. & Herrmann, R., 2006. "Die Bedeutung psychologischer Preisschwellen in Preisstrategien des Lebensmitteleinzelhandels," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 41, March.
    7. Möser, A., 2012. "Coupon, BOGOF, Linksave oder Rabatt? Akzeptanz neuer Verkaufsförderungsaktionen des Lebensmitteleinzelhandels," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 47, March.
    8. Weber, Sascha A. & Salamon, Petra & Hansen, Heiko, 2012. "Volatile world market prices for dairy products - how do they affect domestic price formation: The German cheese market," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122542, European Association of Agricultural Economists.
    9. Grein, Theresa & Herrmann, Roland, 2016. "Price Setting in Online Grocery Markets: The Case of Chocolate," 2016 International European Forum (151st EAAE Seminar), February 15-19, 2016, Innsbruck-Igls, Austria 244457, International European Forum on System Dynamics and Innovation in Food Networks.
    10. Hoffmann, A. & Loy, J.-P., 2010. "Sonderangebote und Preissynchronisation im deutschen Lebensmitteleinzelhandel," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 45, March.
    11. Hillen, Judith, 2018. "Web Scraping For Food Price Research," 58th Annual Conference, Kiel, Germany, September 12-14, 2018 275840, German Association of Agricultural Economists (GEWISOLA).
    12. Herrmann, Roland & Moeser, Anke, 2005. "Psychological Prices and Price Rigidity in Grocery Retailing: Analysis of German Scanner Data," 2005 Annual meeting, July 24-27, Providence, RI 19471, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Herrmann, Roland & Anders, Sven M. & Thompson, Stanley R., 2005. "Übermäßige Werbung und Marktsegmentierung durch staatliche Förderung der Regionalvermarktung: Eine theoretische Analyse," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 54(03), pages 1-11.
    14. Fedoseeva, Svetlana & Herrmann, Roland & Nickolaus, Katharina, 2017. "Was the economics of information approach wrong all the way? Evidence from German grocery r(E)tailing," Journal of Business Research, Elsevier, vol. 80(C), pages 63-72.
    15. Fedoseeva, Svetlana & Grein, Theresa & Herrmann, Roland, 2017. "How German Online Retailers Price Foods: An Empirical Analysis for Chocolate Products," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 8(1), pages 1-13, January.
    16. Karen J. Schroeder & Angela Hoffmann & Jens‐Peter Loy, 2016. "The Distribution of Food Retail Prices and the Euro Changeover: Signpost Items Versus Occasional Goods," Agribusiness, John Wiley & Sons, Ltd., vol. 32(1), pages 93-112, January.
    17. Fedoseeva, Svetlana, 2020. "(Dynamic) willingness to pay and e-commerce: Insights from sparkling wine sector in Russia," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).
    18. Moeser, Anke, 2011. "Coupon, Bogof, Linksave oder Rabatt? Akzeptanz neuer Verkaufsförderungsaktionen des Lebensmitteleinzelhandels," 51st Annual Conference, Halle, Germany, September 28-30, 2011 114499, German Association of Agricultural Economists (GEWISOLA).
    19. Hillen, Judith & Fedoseeva, Svetlana, 2021. "E-commerce and the end of price rigidity?," Journal of Business Research, Elsevier, vol. 125(C), pages 63-73.
    20. Herrmann, Roland & Möser, Anke & Weber, Sascha A., 2009. "Grocery retailing in Germany: Situation, development and pricing strategies," Discussion Papers 41, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
    21. Dreyer, Heiko & Fedoseeva, Svetlana & Herrmann, Roland, 2016. "Gravity Meets Pricing To Market: What A Combinedmethod Approach Tells Us On German Beer Exports," Working Papers 234640, American Association of Wine Economists.

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