Rivalry in Price and Variety among Supermarket Retailers |
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| Authors: | Timothy J Richards Stephen F Hamilton |
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| Institution: | Timothy J. Richards is Power Professor of Agribusiness at the Morrison School of Agribusiness and Resource Management, Arizona State University and Stephen F. Hamilton is associate professor at the Orfalea College of Business, California Polytechnic State University. |
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| 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. |
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| Keywords: | game theory nested CES price competition retailing variety |
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