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Price adjustment at multiproduct retailers

Author

Listed:
  • Daniel Levy

    (Department of Economics, Emory University, Atlanta, GA 30322, USA)

  • Shantanu Dutta

    (Department of Marketing, School of Business Administration, University of Southern California, Los Angeles, CA 90089-1421, USA)

  • Mark Bergen

    (Department of Logistics and Marketing Management, University of Minnesota, Minneapolis, MN 55455, USA)

  • Robert Venable

    (Robert W. Baird & Co., USA)

Abstract

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 USA, 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 stockouts or unwanted inventory accumulations. Finally, we discuss how retail stores try to minimize these negative effects of the price change mistakes. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
    • Handle: RePEc:wly:mgtdec:v:19:y:1998:i:2:p:81-120
    DOI: 10.1002/(SICI)1099-1468(199803)19:2<81::AID-MDE867>3.0.CO;2-W
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    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; Modern Monetary Theory
    • 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; Insider Trading
    • 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; Personnel Economics - - Business Economics - - - Business Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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