Vertical price leadership: A cointegration analysis
Here we detail a method to test whether or not retailers allow suppliers to set the wholesale price not only on the basis of the costs faced by the suppliers but also on the basis of consumer demand. Using standard theory, long-run price relationships between the stages in the channel are derived. Next, these static price relationships are imposed on a dynamic model to be tested for cointegration and long-run noncausality, embedding the hypotheses on vertical price leadership. To derive the testable implications of these hypotheses, we show that the common stochastic trend and long-run equilibrium error must explicitly be assigned to variables in the channel model. The model is particularly relevant for industries characterized by a low degree of product differentiation. An empirical application to two Dutch marketing channels for food products gives comprehensible results. [EconLit citations: C32, L12, Q11] © 2002 Wiley Periodicals, Inc.
Volume (Year): 18 (2002)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Butz, David A, 1997. "Vertical Price Controls with Uncertain Demand," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 433-59, October.
- Naufel J. Vilcassim & Vrinda Kadiyali & Pradeep K. Chintagunta, 1999. "Investigating Dynamic Multifirm Market Interactions in Price and Advertising," Management Science, INFORMS, vol. 45(4), pages 499-518, April.
- Cotterill, Ronald W. & Putsis, William P., Jr. & Dhar, Ravi, 1999.
"Assessing the Competitive Interaction Between Private Labels and National Brands,"
25177, University of Connecticut, Food Marketing Policy Center.
- Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-37, January.
- Ronald W. Cotterill & William P. Putsis Jr. & Ravi Dhar, 1999. "Assessing the Competitive Interaction Between Private Labels and National Brands," Food Marketing Policy Center Research Reports 044, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
- William P. Putsis Jr. & Ronald W. Cotterill & Ravi Dhar, 1999. "Assessing the Competitive Interaction between Private Labels and National Brands," Yale School of Management Working Papers ysm131, Yale School of Management.
- Sohbet Karbuz & Adusei Jumah, 1995. "Cointegration and commodity arbitrage," Agribusiness, John Wiley & Sons, Ltd., vol. 11(3), pages 235-243.
- William P. Putsis, 1999. "Empirical analysis of competitive interaction in food product categories," Agribusiness, John Wiley & Sons, Ltd., vol. 15(3), pages 295-311.
- Gonzalo, J. & Granger, C., 1992.
"Estimation of Common Long-Memory Components in Cointegrated Systems,"
4, Boston University - Department of Economics.
- Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 27-35, January.
- Eunkyu Lee & Richard Staelin, 1997. "Vertical Strategic Interaction: Implications for Channel Pricing Strategy," Marketing Science, INFORMS, vol. 16(3), pages 185-207.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Gerstner, Eitan & Hess, James D, 1991. "A Theory of Channel Price Promotions," American Economic Review, American Economic Association, vol. 81(4), pages 872-86, September.
- Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
- Paul R. Messinger & Chakravarthi Narasimhan, 1995. "Has Power Shifted in the Grocery Channel?," Marketing Science, INFORMS, vol. 14(2), pages 189-223.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:18:y:2002:i:3:p:317-331. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.