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Rivalry in Price and Variety among Supermarket Retailers

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  • 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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