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How do Everyday-Low-Price Supermarkets Adjust Their Prices?

Author

Listed:
  • Guojun He

    (University of Hong Kong)

  • Jeffrey T. LaFrance

    (Monash University)

  • Jeffrey M. Perloff

    (University of California, Berkeley and Giannini Foundation)

  • Richard Volpe

    (California Polytechnic State University)

Abstract

Was the rapid increase and collapse of commodity prices in 2007–2009 passed through to supermarket prices symmetrically? This study is the first to address this issue for an everyday-low-price (EDLP) supermarket chain, which infrequently changes its prices and rarely has sales. We also reexamine the question for typical firms that set a usual high price and have frequent sales. We examine 25 goods that use a primary commodity (such as rice in a bag of rice). We fail to reject symmetric adjustments for very few goods for both types of stores. In addition, we find that the probability an EDLP chain adjusts its prices in response to even a large commodity price shock is low for most goods.

Suggested Citation

  • Guojun He & Jeffrey T. LaFrance & Jeffrey M. Perloff & Richard Volpe, 2024. "How do Everyday-Low-Price Supermarkets Adjust Their Prices?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(1), pages 117-146, February.
    • Handle: RePEc:kap:revind:v:64:y:2024:i:1:d:10.1007_s11151-023-09922-0
    DOI: 10.1007/s11151-023-09922-0
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    More about this item

    Keywords

    Everyday-low-price supermarkets; Asymmetric price transmission; Food prices; Price adjustment; Retail price; Time series;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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