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Retailer heterogeneity and price transmission

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  • Hao Lan
  • Tim A. Lloyd
  • Steve McCorriston
  • Christopher Wyn Morgan

Abstract

Differences in price dynamics across retail chains, even for identical products, offer the opportunity to provide new insights into the determinants of price transmission. Specifically, we highlight the role of strategic complementarity and mark‐up elasticities as the factors underpinning price transmission. Using supermarket data on a sample of orange juice and coffee products from the seven largest retail chains in the UK, the results show that ignoring strategic complementarity exerts a positive bias on the estimation of price transmission and hence overstates the importance of input costs in price setting. In contrast to recent research, private label products are found to exhibit consistently lower levels of price transmission (higher mark‐up elasticity) than national brands, likely reflecting the context of competition in UK food retailing. The focus on mark‐up elasticities points to links between the frequency of price adjustment and competition as determinants of price transmission.

Suggested Citation

  • Hao Lan & Tim A. Lloyd & Steve McCorriston & Christopher Wyn Morgan, 2022. "Retailer heterogeneity and price transmission," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(5), pages 1679-1700, October.
    • Handle: RePEc:wly:ajagec:v:104:y:2022:i:5:p:1679-1700
    DOI: 10.1111/ajae.12286
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    References listed on IDEAS

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    Cited by:

    1. Guojun He & Jeffrey T. LaFrance & Jeffrey M. Perloff & Richard Volpe, 2024. "How do Everyday-Low-Price Supermarkets Adjust Their Prices?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(1), pages 117-146, February.
    2. Richards, Timothy J. & Paudel, Ujjwol, 2024. "Minimum Wages and Pass-Through," 2024 Annual Meeting, July 28-30, New Orleans, LA 343648, Agricultural and Applied Economics Association.
    3. Luca Cattivelli & Federico Antonioli, 2023. "When cointegration is interrupted: Price transmission analysis in the Italian dairy‐feed industry," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 744-761, July.

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