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Price Adjustment at Multiproduct Retailers Author info | Abstract | Publisher info | Download info | Related research | Statistics Daniel Levy (Bar-Ilan University)
Shantanu Dutta (University of Southern California)
Mark Bergen (University of Minnesota)
Robert Venable (Robert W. Baird, Co.)
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We empirically study the price adjustment process at multiproduct retail stores. We use a unique store level data set for five large supermarket and one drugstore chains in the U.S., to document the exact process required to change prices. Our data set allows us to study this process in great detail, describing the exact procedure, stages, and steps undertaken during the price change process. We also discuss various aspects of the microeconomic environment in which the price adjustment decisions are made, factors affecting the price adjustment decisions, and firm-level implications of price adjustment decisions. Specifically, we examine the effects of the complexity of the price change process on the stores’ pricing strategy. We also study how the steps involved in the price change process, combined with the laws governing the retail price setting and adjustment, along with the competitive market structure of the retail grocery industry, influence the frequency of price changes. We also examine how the mistakes that occur in the price change process influence the actions taken by these multiproduct retailers. In particular, we study how these mistakes can make the stores vulnerable to civil law suits and penalties, and also damage their reputation. We also show how the mistakes can lead to stock outs or unwanted inventory accumulations. Finally, we discuss how retail stores try to minimize these negative effects of the price change mistakes.
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Paper provided by EconWPA in its series Industrial Organization with number
0505005.
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Length: 62 pages
Date of creation: 15 May 2005Date of revision:
Handle: RePEc:wpa:wuwpio:0505005Note: Type of Document - pdf; pages: 62Contact details of provider: Web page: http://129.3.20.41
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Keywords: Cost of Price Adjustment ; Price Adjustment Process ; Menu Cost ; Posted Prices ; Multiproduct Retailer ; Price rigidity ; Sticky Prices ; Frequency of Price Changes ; Time Dependent Pricing ; Retail Supermarket and Drugstore Chains ; Other versions of this item:
Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
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