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Rivalry in Price and Variety among Supermarket Retailers

Author

Listed:
  • 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.

Suggested Citation

  • Timothy J. Richards & Stephen F. Hamilton, 2006. "Rivalry in Price and Variety among Supermarket Retailers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 710-726.
  • Handle: RePEc:oup:ajagec:v:88:y:2006:i:3:p:710-726
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00890.x
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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. repec:eee:touman:v:36:y:2013:i:c:p:435-440 is not listed on IDEAS
    4. repec:got:cegedp:66 is not listed on IDEAS
    5. 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.
    6. repec:eee:jouret:v:85:y:2009:i:1:p:56-70 is not listed on IDEAS
    7. 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.
    8. Ho, Shuay-Tsyr & Qu, Mingyang & Rickard, Bradley & Costanigro, Marco & McLaughlin, Edward, 2016. "Retail Alcohol Availability and Product Diversity," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235913, Agricultural and Applied Economics Association.
    9. Stéphane Turolla, 2016. "Spatial Competition in the French Supermarket Industry," Annals of Economics and Statistics, GENES, issue 121-122, pages 213-259.
    10. repec:eee:jfpoli:v:74:y:2018:i:c:p:212-224 is not listed on IDEAS
    11. 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.
    12. Minha Hwang & Bart J. Bronnenberg & Raphael Thomadsen, 2010. "An Empirical Analysis of Assortment Similarities Across U.S. Supermarkets," Marketing Science, INFORMS, vol. 29(5), pages 858-879, 09-10.
    13. repec:oup:apecpp:v:39:y:2017:i:4:p:682-709. is not listed on IDEAS
    14. Timothy Richards & Stephen Hamilton & Koichi Yonezawa, 2015. "Retail Market Power in a Shopping Basket Model of Supermarket Competition," Working Papers 1503, California Polytechnic State University, Department of Economics.
    15. Richards, Timothy J. & Hamilton, Stephen F. & Allender, William, 2016. "Search and price dispersion in online grocery markets," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 255-281.
    16. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series 2597, CESifo Group Munich.
    17. Arnade, Carlos Anthony & 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.
    18. 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.
    19. repec:kap:jculte:v:42:y:2018:i:1:d:10.1007_s10824-016-9276-7 is not listed on IDEAS
    20. Kaiser Karen & Schwabe Rainer, 2012. "Preference for Variety," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-32, January.
    21. Dürr, Niklas S. & Engelstätter, Benjamin & Ward, Michael R., 2017. "Strategic microscheduling of movies," ZEW Discussion Papers 17-033, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    22. 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.
    23. 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.
    24. 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.

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