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Sales Promotion and Cooperative Retail Pricing Strategies

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  • Richards, Timothy J.
  • Patterson, Paul M.

Abstract

Supermarket retailers make strategic pricing decisions in a high-frequency, repeated game environment both in buying and selling fresh produce. In this context, there is some question as to whether a non-cooperative equilibrium can emerge that produces margins above the competitive level. Supermarket pricing results from tacitly collusive equilibria supported by trigger price strategies played in upstream markets. Upstream activities are, in turn, driven by periodic retail price promotions. We test this hypothesis using a sample of fresh produce pricing data from 20 supermarket chains in markets distributed throughout the U.S. Our results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.

Suggested Citation

  • Richards, Timothy J. & Patterson, Paul M., 2004. "Sales Promotion and Cooperative Retail Pricing Strategies," Working Papers 28542, Arizona State University, Morrison School of Agribusiness and Resource Management.
    • Handle: RePEc:ags:asumwp:28542
    DOI: 10.22004/ag.econ.28542
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    2. Hamister, James W. & Suresh, Nallan C., 2008. "The impact of pricing policy on sales variability in a supermarket retail context," International Journal of Production Economics, Elsevier, vol. 111(2), pages 441-455, February.
    3. Franz Wirl, 2015. "Downstream and upstream oligopolies when retailer’s effort matters," Journal of Economics, Springer, vol. 116(2), pages 99-127, October.
    4. Richards, Timothy J. & Acharya, Ram N. & Molina, Ignacio, 2009. "Retail and Wholesale Market Power in Organic Foods," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49329, Agricultural and Applied Economics Association.

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