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Identifying and characterising price leadership in British supermarkets

  • Seaton, Jonathan S.

    (Loughborough University)

  • Waterson, Michael

    (University of Warwick)

Price leadership is a concept that lacks precision. We propose a deliberately narrow, falsifiable, definition and illustrate its feasibility using the two leading British supermarket chains. We find both firms engaging in leadership behaviour over a range of products, with the larger being somewhat more dominant but the smaller increasing leadership activity over time. Surprisingly, more price leadership events are price reductions than price increases, but the increases are of larger monetary amounts (so average price increases over time) and the events appear not necessarily related to cost changes. Price leadership appears to play some role in price increases.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2012/twerp_987.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 987.

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Date of creation: 2012
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Handle: RePEc:wrk:warwec:987
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  1. van Damme, E.E.C. & Hurkens, J.P.M., 1998. "Endogenous price leadership," Discussion Paper 98.68, Tilburg University, Center for Economic Research.
  2. Michael D. Noel, 2008. "Edgeworth Price Cycles and Focal Prices: Computational Dynamic Markov Equilibria," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 345-377, 06.
  3. Chakraborty, Ratula & Dobson, Paul & Seaton, Jonathan S. & Waterson, Michael, 2011. "Pricing in inflationary times- the penny drops," The Warwick Economics Research Paper Series (TWERPS) 975, University of Warwick, Department of Economics.
  4. Shuba Srinivasan & Koen Pauwels & Dominique M. Hanssens & Marnik G. Dekimpe, 2004. "Do Promotions Benefit Manufacturers, Retailers, or Both?," Management Science, INFORMS, vol. 50(5), pages 617-629, May.
  5. Deneckere, R. & Kovenock, D. & Lee, R.E., 1988. "A Model of Price Leadership Based on Consumer Loyalty," Purdue University Economics Working Papers 947, Purdue University, Department of Economics.
  6. Raymond J. Deneckere & Dan Kovenock, 1992. "Price Leadership," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 143-162.
    • Raymond Deneckere & Dan Kovenock, 1988. "Price Leadership," Discussion Papers 773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Rachel Griffith & Ephraim Leibtag & Andrew Leicester & Aviv Nevo, 2009. "Consumer Shopping Behavior: How Much Do Consumers Save?," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 99-120, Spring.
  8. Seaton, Jonathan S & Waterson, Michael, 2012. "Price flexibility in British supermarkets," The Warwick Economics Research Paper Series (TWERPS) 993, University of Warwick, Department of Economics.
  9. Michael Noel, 2009. "Do retail gasoline prices respond asymmetrically to cost shocks? The influence of Edgeworth Cycles," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 582-595.
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  11. Pastine, Ivan & Pastine, Tuvana, 2004. "Cost of delay and endogenous price leadership," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 135-145, January.
  12. Rabah Amir & Anna Stepanova, 2000. "Second-Mover Advantage and Price Leadership in Bertrand Duopoly," CIE Discussion Papers 2000-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  13. Eckert, Andrew, 2003. "Retail price cycles and the presence of small firms," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 151-170, February.
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  15. Matt Lewis, 2004. "Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market," Industrial Organization 0407010, EconWPA.
  16. Patrick J. Kehoe & Virgiliu Midrigan, 2010. "Prices are Sticky After All," NBER Working Papers 16364, National Bureau of Economic Research, Inc.
  17. Peter E. Rossi & Judith A. Chevalier & Anil K. Kashyap, 2002. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," Yale School of Management Working Papers ysm291, Yale School of Management.
  18. Emi Nakamura, 2008. "Pass-Through in Retail and Wholesale," American Economic Review, American Economic Association, vol. 98(2), pages 430-37, May.
  19. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
  20. Zhongmin Wang, 2009. "(Mixed) Strategy in Oligopoly Pricing: Evidence from Gasoline Price Cycles Before and Under a Timing Regulation," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 987-1030, December.
  21. Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
  22. Lewis, Matt & Noel, Michael, 2009. "The Speed of Gasoline Price Response in Markets With and Without Edgeworth Cycles," University of California at San Diego, Economics Working Paper Series qt8j36j1s1, Department of Economics, UC San Diego.
  23. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
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