IDEAS home Printed from https://ideas.repec.org/a/wly/agribz/v18y2002i3p317-331.html
   My bibliography  Save this article

Vertical price leadership: A cointegration analysis

Author

Listed:
  • W. Erno Kuiper

    (Marketing and Consumer Behavior Group, Department of Social Sciences, Wageningen University, Hollandseweg 1, NL-6706 KN Wageningen, The Netherlands)

  • Matthew T.G. Meulenberg

    (Marketing and Consumer Behavior Group, Department of Social Sciences, Wageningen University, Hollandseweg 1, NL-6706 KN Wageningen, The Netherlands)

Abstract

Here we detail a method to test whether or not retailers allow suppliers to set the wholesale price not only on the basis of the costs faced by the suppliers but also on the basis of consumer demand. Using standard theory, long-run price relationships between the stages in the channel are derived. Next, these static price relationships are imposed on a dynamic model to be tested for cointegration and long-run noncausality, embedding the hypotheses on vertical price leadership. To derive the testable implications of these hypotheses, we show that the common stochastic trend and long-run equilibrium error must explicitly be assigned to variables in the channel model. The model is particularly relevant for industries characterized by a low degree of product differentiation. An empirical application to two Dutch marketing channels for food products gives comprehensible results. [EconLit citations: C32, L12, Q11] © 2002 Wiley Periodicals, Inc.

Suggested Citation

  • W. Erno Kuiper & Matthew T.G. Meulenberg, 2002. "Vertical price leadership: A cointegration analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 18(3), pages 317-331.
    • Handle: RePEc:wly:agribz:v:18:y:2002:i:3:p:317-331
    DOI: 10.1002/agr.10025
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/agr.10025
    File Function: Link to full text; subscription required
    Download Restriction: no
    File URL: https://libkey.io/10.1002/agr.10025?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-137, January.
    2. Butz, David A, 1997. "Vertical Price Controls with Uncertain Demand," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 433-459, October.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 27-35, January.
    5. Eunkyu Lee & Richard Staelin, 1997. "Vertical Strategic Interaction: Implications for Channel Pricing Strategy," Marketing Science, INFORMS, vol. 16(3), pages 185-207.
    6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    7. Gerstner, Eitan & Hess, James D, 1991. "A Theory of Channel Price Promotions," American Economic Review, American Economic Association, vol. 81(4), pages 872-886, September.
    8. Naufel J. Vilcassim & Vrinda Kadiyali & Pradeep K. Chintagunta, 1999. "Investigating Dynamic Multifirm Market Interactions in Price and Advertising," Management Science, INFORMS, vol. 45(4), pages 499-518, April.
    9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    10. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
    11. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    12. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    13. William P. Putsis, 1999. "Empirical analysis of competitive interaction in food product categories," Agribusiness, John Wiley & Sons, Ltd., vol. 15(3), pages 295-311.
    14. Sohbet Karbuz & Adusei Jumah, 1995. "Cointegration and commodity arbitrage," Agribusiness, John Wiley & Sons, Ltd., vol. 11(3), pages 235-243.
    15. Paul R. Messinger & Chakravarthi Narasimhan, 1995. "Has Power Shifted in the Grocery Channel?," Marketing Science, INFORMS, vol. 14(2), pages 189-223.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Meyer, Jochen, 2004. "Measuring market integration in the presence of transaction costs--a threshold vector error correction approach," Agricultural Economics, Blackwell, vol. 31(2-3), pages 327-334, December.
    2. Kuiper, W. Erno & Kuwornu, John K.M. & Pennings, Joost M.E., 2003. "Time Series Analysis Of A Principal-Agent Model To Assess Risk Shifting And Bargaining Power In Commodity Marketing Channels," 2003 Annual meeting, July 27-30, Montreal, Canada 22046, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Daphne M.I. Verreth & Grigorios Emvalomatis & Frank Bunte & Ron Kemp & Alfons G.J.M. Oude Lansink, 2015. "Price Transmission, International Trade, and Asymmetric Relationships in the Dutch Agri‐Food Chain," Agribusiness, John Wiley & Sons, Ltd., vol. 31(4), pages 521-542, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kuiper, W. Erno & Lutz, Clemens & van Tilburg, Aad, 2002. "Vertical Price Leadership on Local Maize Markets in Benin," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24886, European Association of Agricultural Economists.
    2. Erno Kuiper, W. & Lutz, Clemens & van Tilburg, Aad, 2003. "Vertical price leadership on local maize markets in Benin," Journal of Development Economics, Elsevier, vol. 71(2), pages 417-433, August.
    3. Putsis, William P., Jr., 1998. "Empirical Analysis of Competitive Interaction in Food Product Categories," Research Reports 25221, University of Connecticut, Food Marketing Policy Center.
    4. Bashiri Behmiri, Niaz & Pires Manso, José R., 2012. "Does Portuguese economy support crude oil conservation hypothesis?," Energy Policy, Elsevier, vol. 45(C), pages 628-634.
    5. K. Sudhir, 2001. "Structural Analysis of Manufacturer Pricing in the Presence of a Strategic Retailer," Marketing Science, INFORMS, vol. 20(3), pages 244-264, October.
    6. de Meulemeester, Jean-Luc & Rochat, Denis, 1995. "A causality analysis of the link between higher education and economic development," Economics of Education Review, Elsevier, vol. 14(4), pages 351-361, December.
    7. Nafeesa Yunus & J. Hansz & Paul Kennedy, 2012. "Dynamic Interactions Between Private and Public Real Estate Markets: Some International Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 1021-1040, November.
    8. S. Gurcan Gulen, 1996. "Is OPEC a Cartel? Evidence from Cointegration and Causality Tests," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 43-57.
    9. Adrian C. Darnell, 1994. "A Dictionary Of Econometrics," Books, Edward Elgar Publishing, number 118.
    10. Michaelides, Panayotis G. & Papageorgiou, Theofanis, 2012. "On the transmission of economic fluctuations from the USA to EU-15 (1960–2011)," Journal of Economics and Business, Elsevier, vol. 64(6), pages 427-438.
    11. P. Srinivasan & Inder Siddanth Ravindra, 2015. "Causality among Energy Consumption, CO2 Emission, Economic Growth and Trade," Foreign Trade Review, , vol. 50(3), pages 168-189, August.
    12. Chor Foon Tang, 2015. "How Stable is the Savings-led Growth Hypothesis in Malaysia? The Bootstrap Simulation and Recursive Causality Tests," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(1), pages 1-17, February.
    13. Tang, Chor Foon, 2008. "A re-examination of the relationship between electricity consumption and economic growth in Malaysia," Energy Policy, Elsevier, vol. 36(8), pages 3067-3075, August.
    14. Choi, Sungchul & Fredj, Karima, 2013. "Price competition and store competition: Store brands vs. national brand," European Journal of Operational Research, Elsevier, vol. 225(1), pages 166-178.
    15. Angelovska, Julijana, 2017. "The Impact Of Financial Crises On The Short-Term Interaction Between Balkan Stock Markets," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 8(2), pages 53-66.
    16. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 71037, University Library of Munich, Germany.
    17. Saffet Akdağ & İlker Kiliç & Hakan Yildirim, 2019. "Does VIX scare stocks of tourism companies?," Letters in Spatial and Resource Sciences, Springer, vol. 12(3), pages 215-232, December.
    18. Subrata ROY, 2020. "Foreign trade policy and economic growth: Indian evidence," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(624), A), pages 107-126, Autumn.
    19. Nafeesa Yunus & Peggy Swanson, 2007. "Modelling Linkages between US and Asia‐Pacific Securitized Property Markets," Journal of Property Research, Taylor & Francis Journals, vol. 24(2), pages 95-122.
    20. Gao Lu Zou & Kwong Wing Chau, 2015. "Determinants and Sustainability of House Prices: The Case of Shanghai, China," Sustainability, MDPI, vol. 7(4), pages 1-25, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:18:y:2002:i:3:p:317-331. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.