Sales promotion and cooperative retail pricing strategies

Timothy Richards; Paul M. Patterson

doi:10.1007/s11151-005-0182-y

Sales promotion and cooperative retail pricing strategies

Timothy Richards, Paul M. Patterson

Agribusiness, Morrison School of

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

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. This hypothesis is tested using a sample of fresh produce pricing data from 20 US supermarket chains. The results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.

Original language	English (US)
Pages (from-to)	391-413
Number of pages	23
Journal	Review of Industrial Organization
Volume	26
Issue number	4
DOIs	https://doi.org/10.1007/s11151-005-0182-y
State	Published - Jun 2005

Keywords

Dynamics
Game theory
Nash equilibrium
Perishables
Supermarkets
Tacit collusion

ASJC Scopus subject areas

Economics and Econometrics
Strategy and Management
Organizational Behavior and Human Resource Management
Management of Technology and Innovation

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10.1007/s11151-005-0182-y

Cite this

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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. This hypothesis is tested using a sample of fresh produce pricing data from 20 US supermarket chains. The results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.",

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author = "Timothy Richards and Patterson, {Paul M.}",

note = "Funding Information: The authors wish to thank the Economic Research Service of the USDA for financial support. The findings reported in this manuscript, however, do not represent opinions of the USDA nor Economic Research Service staff and the authors are solely responsible for the conclusions drawn herein.",

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N2 - 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. This hypothesis is tested using a sample of fresh produce pricing data from 20 US supermarket chains. The results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.

AB - 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. This hypothesis is tested using a sample of fresh produce pricing data from 20 US supermarket chains. The results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.

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KW - Tacit collusion

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Sales promotion and cooperative retail pricing strategies

Abstract

Keywords

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