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Milk Retail Sales Patterns in a Transition Economy. The Case of Hungary

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  • Bakucs, Lajos Zoltan
  • Ferto, Imre

Abstract

Modern theories of sales make conflicting predictions about the temporal pattern of sales, which we test using retail chain level data. In this paper, we focus on the retail sale patterns of two retail milk prices in a New Member State (NMS), Hungary using weekly data across eight retail chain between 2005 January and 2008 June. We employ a battery of empirical tests, to try a number of sale theory hypotheses. First, we present summary statistics, histograms, and correlations of prices and sales from which we conclude that no theory of sales fully describes sale patterns and price distributions. Second, we apply vector autoregressive analysis and Granger tests of temporal ordering (”causality tests”) to determine whether the sale of one retail chain is followed in a predictable way by the sale of another retail chain or its own later sales. Our results suggest a dual retail market structure. Finally, we employ panel cointegration to test confirm that durable goods should have qualitatively different pricing pattern than less-durable goods. Similarly to Berck et al. (2007) we fail to see a clear difference between storable milk and boxed milk patterns.

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Bibliographic Info

Paper provided by Agricultural Economics Society in its series 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland with number 50932.

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Date of creation: 01 Apr 2009
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Handle: RePEc:ags:aesc09:50932

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Keywords: Sales; retail prices; milk; Livestock Production/Industries;

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  1. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  2. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  3. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
  4. Berck, Peter & Brown, Jennifer & Perloff, Jeffrey M & Villas-Boas, Sofia B., 2007. "Sales: Tests of Theories on Causality and Timing," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2g56n1jk, Department of Agricultural & Resource Economics, UC Berkeley.
  5. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
  6. Ying Zhao, 2006. "Price Dispersion in the Grocery Market," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1175-1192, May.
  7. Rajiv Lal & J. Miguel Villas-Boas, 1998. "Price Promotions and Trade Deals with Multiproduct Retailers," Management Science, INFORMS, vol. 44(7), pages 935-949, July.
  8. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-93, June.
  9. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  10. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 353-68, July.
  11. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-83, August.
  12. Reinganum, Jennifer F, 1979. "A Simple Model of Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 851-58, August.
  13. Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 487-504, July.
  14. Conlisk, John & Gerstner, Eitan & Sobel, Joel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 489-505, August.
  15. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-50, March.
  16. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  17. Martin Pesendorfer, 2002. "Retail Sales: A Study of Pricing Behavior in Supermarkets," The Journal of Business, University of Chicago Press, vol. 75(1), pages 33-66, January.
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