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Rivalry in Price and Variety among Supermarket Retailers

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  • Timothy J. Richards
  • Stephen F. Hamilton

Abstract

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. Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00890.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 88 (2006)
Issue (Month): 3 ()
Pages: 710-726

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Handle: RePEc:oup:ajagec:v:88:y:2006:i:3:p:710-726

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Cited by:
  1. Eckel, Carsten, 2007. "International trade and retailing: Diversity versus accessibility and the creation of retail deserts," Center for European, Governance and Economic Development Research Discussion Papers 66, University of Goettingen, Department of Economics.
  2. Alessandro Bonanno & Rigoberto A. Lopez, 2007. "Competition Effects of Supermarket Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 555-568.
  3. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series 2597, CESifo Group Munich.
  4. Eckel, Carsten, 2007. "International trade and retailing: Diversity versus accessibility and the creation of retail deserts," Center for European, Governance and Economic Development Research Discussion Papers 66, University of Goettingen, Department of Economics.
  5. Richards, Timothy J. & Hamilton, Stephen F. & Patterson, Paul M., 2010. "Spatial Competition and Private Labels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(2), August.
  6. Kaiser Karen & Schwabe Rainer, 2012. "Preference for Variety," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-32, January.
  7. Richards, Timothy J. & Patterson, Paul M., 2006. "Firm-Level Competition in Price and Variety," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(03), December.
  8. Jeannette Wicks-Lim & Jeffrey Thompson, 2010. "Combining Minimum Wage and Earned Income Tax Credit Policies to Guarantee a Decent Living Standard to All U.S. Workers," Published Studies peri_mw_eitc_oct2010, Political Economy Research Institute, University of Massachusetts at Amherst.
  9. Hwang, M. & Bronnenberg, B.J. & Thomadsen, R., 2010. "An empirical analysis of assortment similarities across U.S. supermarkets," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3736994, Tilburg University.
  10. T.V.S.Ramamohan Rao, 2011. "Contemporary Relevance and Ongoing Controversies Related to the CES Production Function," Journal of Quantitative Economics, The Indian Econometric Society, vol. 9(2), pages 36-57, July.
  11. Atsuyuki Kato, 2012. "Productivity, returns to scale and product differentiation in the retail trade industry: an empirical analysis using Japanese firm-level data," Journal of Productivity Analysis, Springer, vol. 38(3), pages 345-353, December.
  12. Bonanno, Alessandro & Chenarides, Lauren & Goetz, Stephan J., 2012. "Limited Food Access as an Equilibrium Outcome: An Empirical Analysis," 2012 AAEA/EAAE Food Environment Symposium, May 30-31, Boston, MA 123196, Agricultural and Applied Economics Association.
  13. Arnade, Carlos A. & Gopinath, Munisamy & Pick, Daniel H., 2011. "How Much Do Consumers Benefit from New Brand Introductions? The Case of Potato Chips," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(1), April.
  14. Engelstätter, Benjamin & Ward, Michael R., 2013. "Strategic timing of entry: Evidence from video games," ZEW Discussion Papers 13-117, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Stéphane Turolla, 2012. "Spatial competition in the French supermarket industry," Working Papers SMART - LERECO 12-01, INRA UMR SMART.

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