Rivalry in price and variety among supermarket retailers

Timothy Richards, Stephen F. Hamilton

Research output: Contribution to journalArticlepeer-review

40 Scopus citations

Abstract

Recent theoretical models of retail competition suggest that product heterogeneity is critical to retail price and variety strategies. This article provides empirical evidence on supermarket retailers' price and variety strategies using a nested constant elasticity of substitution (NCES) modeling framework. The model is estimated using chain-level scanner data for four major grocery chains in a large, urban West Coast market. The results show that retailers compete for market share using both price and variety. While they all tend to follow moderately cooperative pricing strategies, the extent to which they follow cooperative strategies in variety is less homogeneous.

Original languageEnglish (US)
Pages (from-to)710-726
Number of pages17
JournalAmerican Journal of Agricultural Economics
Volume88
Issue number3
DOIs
StatePublished - Aug 2006

Keywords

  • Game theory
  • Nested CES
  • Price competition
  • Retailing
  • Variety

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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