(Translated by https://www.hiragana.jp/)
Market Competition, and Metropolitan-Area Grocery Prices
IDEAS home Printed from https://ideas.repec.org/p/ags/puaesp/200407.html
   My bibliography  Save this paper

Market Competition, and Metropolitan-Area Grocery Prices

Author

Listed:
  • Binkley, James K.
  • Connor, John M.

Abstract

This paper examines the relationship of 1987 retail grocery prices to supermarket sales concentration across 95 U.S. metropolitan areas. The regression model incorporates a large number of population, retail-cost, and retail competition factors and separate prices by type of grocery item. We find that the concentration-price relationship is sensitive to item type: positive for packaged, branded, dry groceries and unrelated for produce, meat, and dairy product prices. As for market rivalry, we find that small grocery stores provide no grocery price competition for supermarkets. However, branded grocery prices are driven down by fast-food places and by rapid price churning, whereas for unbranded foods the presence of warehouse stores places downward pressure on supermarket prices while fast-food presence does not. For the branded-groceries component, we also find prices higher in large, fast-growing, low- income, Eastern cities. We also find that cities where rents, wages, and electricity costs are high tend to have high dry grocery prices. However, for the unbranded-products component retail costs are unrelated to prices, and cities in the South have the highest prices.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Binkley, James K. & Connor, John M., 1996. "Market Competition, and Metropolitan-Area Grocery Prices," Staff Papers 200407, Purdue University, Department of Agricultural Economics.
    • Handle: RePEc:ags:puaesp:200407
    DOI: 10.22004/ag.econ.200407
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/200407/files/agecon-purdue-96-15.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.200407?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-391, June.
    2. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 493-510.
    3. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-250, March.
    4. Lamm, R McFall, 1981. "Prices and Concentration in the Food Retailing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 30(1), pages 67-78, September.
    5. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-370, July.
    6. Kim, Byung-Do & Blattberg, Robert C & Rossi, Peter E, 1995. "Modeling the Distribution of Price Sensitivity and Implications for Optimal Retail Pricing," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 291-303, July.
    7. Severin Borenstein, 1985. "Price Discrimination in Free-Entry Markets," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 380-397, Autumn.
    8. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
    9. Heywood, John S, 1986. "Labor Quality and the Concentration-Earnings Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 342-346, May.
    10. William J. Baumol & Richard E. Quandt & Harold T. Shapiro, 1964. "Oligopoly Theory and Retail Food Pricing," The Journal of Business, University of Chicago Press, vol. 37, pages 346-346.
    11. Chevalier, Judith A, 1995. "Do LBO Supermarkets Charge More? An Empirical Analysis of the Effects of LBOs on Supermarket Pricing," Journal of Finance, American Finance Association, vol. 50(4), pages 1095-1112, September.
    12. Kinsey, Jean D. & Senauer, Benjamin, 1996. "Food Marketing In An Electronic Age: Implications For Agricultural Producers," Working Papers 14303, University of Minnesota, The Food Industry Center.
    13. James D. Hess & Eitan Gerstner, 1987. "Loss Leader Pricing and Rain Check Policy," Marketing Science, INFORMS, vol. 6(4), pages 358-374.
    14. Ronald W. Cotterill, 1991. "Food Retailing: Mergers, Leveraged Buyouts, and Performance," Food Marketing Policy Center Research Reports 014, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    15. Gee, J M A, 1985. "Competitive Pricing for a Spatial Industry," Oxford Economic Papers, Oxford University Press, vol. 37(3), pages 466-485, September.
    16. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-386, August.
    17. Rajiv Lal & Carmen Matutes, 1989. "Price Competition in Multimarket Duopolies," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 516-537, Winter.
    18. Bruce L. Benson & Merle D. Faminow, 1985. "An Alternative View of Pricing in Retail Food Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 296-306.
    19. Katz, Michael L, 1984. "Price Discrimination and Monopolistic Competition," Econometrica, Econometric Society, vol. 52(6), pages 1453-1471, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chih-ching Yu & John M. Connor, 2002. "The price-concentration relationship in grocery retailing: Retesting Newmark," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 413-426.
    2. Alessandro Bonanno & Rigoberto A. Lopez, 2004. "Private Labels, Retail Configuration, and Fluid Milk Prices," Food Marketing Policy Center Research Reports 082, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    3. Leschewski, Andrea Marie & Weatherspoon, Dave D., 2014. "Fast Food Restaurant Pricing Strategies in Michigan Food Deserts," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(A), pages 1-24, March.
    4. Volpe, Richard J., III & Lavoie, Nathalie, 2006. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Working Paper Series 14515, University of Massachusetts, Amherst, Department of Resource Economics.
    5. Kinsey, Jean D., 1998. "Concentration Of Ownership In Food Retailing: A Review Of The Evidence About Consumer Impact," Working Papers 14329, University of Minnesota, The Food Industry Center.
    6. Richard J. Volpe & Nathalie Lavoie, 2008. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(1), pages 4-26.
    7. Martens, Bobby J. & Dooley, Frank J. & Kim, Sounghun, 2006. "The Effect Of Entry By Wal-Mart Supercenters On Retail Grocery Concentration," 2006 Annual meeting, July 23-26, Long Beach, CA 21101, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Digal, Larry N. & Ahmadi-Esfahani, Fredoun Z., 2002. "Market power analysis in the retail food industry: a survey of methods," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-26.
    9. Frigon, Mathieu & Doyon, Maurice & Romain, Robert F.J., 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Research Reports 25220, University of Connecticut, Food Marketing Policy Center.
    10. Volpe, Richard J., III & Lavoie, Nathalie, 2005. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," 2005 Annual meeting, July 24-27, Providence, RI 19188, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Chung, Chanjin & Henneberry, Shida Rastegari & Tostao, Emilio, 2004. "Will The Voluntary Checkoff Program Be The Answer? An Analysis Of Optimal Advertising And Free-Rider Problem In The U.S. Beef Industry," 2004 Annual Meeting, February 14-18, 2004, Tulsa, Oklahoma 34694, Southern Agricultural Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Connor, John M., 1999. "Evolving Research On Price Competition In The Grocery Retailing Industry: An Appraisal," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(2), pages 1-9, October.
    2. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    3. Patrick Paul Walsh & Ciara Whelan, 1999. "A Rationale for Repealing the 1987 Groceries Order," The Economic and Social Review, Economic and Social Studies, vol. 30(1), pages 71-90.
    4. Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 585-637.
    5. Loy, Jens-Peter & Weaver, Robert D., 2003. "Retail Sales: Do They Mean Reduced Expenditures? German Grocery Evidence," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25914, International Association of Agricultural Economists.
    6. Walsh, Patrick Paul & Whelan, Ciara, 1999. "Loss leading and price intervention in multiproduct retailing: welfare outcomes in a second-best world1," International Review of Law and Economics, Elsevier, vol. 19(3), pages 333-347, September.
    7. Li, Lan & Carman, Hoy F. & Sexton, Richard J., 2005. "Grocery Retailer Pricing Behavior for California Avocados with Implications for Industry Promotion Strategies," 2005 Annual meeting, July 24-27, Providence, RI 19498, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. He, Qingxin & Zheng, Xiaoyong, 2020. "Price discrimination across different ticket distribution channels: Evidence from the US-china flight market," China Economic Review, Elsevier, vol. 61(C).
    9. Kauf, Teresa L., 1999. "Price discrimination and bargaining power in the U.S. vaccine market: Implications for childhood immunization policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(2), pages 249-265.
    10. Marcus Asplund & Rickard Eriksson & Niklas Strand, 2008. "Price Discrimination In Oligopoly: Evidence From Regional Newspapers," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 333-346, June.
    11. Rhodes, Andrew, 2011. "Multiproduct pricing and the Diamond Paradox," MPRA Paper 32511, University Library of Munich, Germany.
    12. Kutsal Dogan & Ernan Haruvy & Ram Rao, 2010. "Who should practice price discrimination using rebates in an asymmetric duopoly?," Quantitative Marketing and Economics (QME), Springer, vol. 8(1), pages 61-90, March.
    13. Ge, Houtian & Gomez, Miguel I. & Richards, Timothy J., 2018. "Retailer Marketing Strategy and Consumer Purchase Decision for Local Food – An Agent-Based Model," 2018 Annual Meeting, August 5-7, Washington, D.C. 273819, Agricultural and Applied Economics Association.
    14. Davis, David E., 2009. "Price and promotion effects of supermarket mergers," SDSU Working Papers in Progress 12009, South Dakota State University, Department of Economics, revised Jun 2010.
    15. Paul Simshauser & David Downer, 2016. "On the Inequity of Flat-rate Electricity Tariffs," The Energy Journal, , vol. 37(3), pages 199-230, July.
    16. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
    17. Timothy Richards, 2007. "A nested logit model of strategic promotion," Quantitative Marketing and Economics (QME), Springer, vol. 5(1), pages 63-91, March.
    18. Meilin Ma & Tina L. Saitone & Richard J. Volpe & Richard J. Sexton & Michelle Saksena, 2019. "Market Concentration, Market Shares, and Retail Food Prices: Evidence from the U.S. Women, Infants, and Children Program," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(3), pages 542-562, September.
    19. Johansen, Bjørn Olav, 2012. "The Buyer Power Of Multiproduct Retailers: Competition With One-Stop Shopping," Working Papers in Economics 03/12, University of Bergen, Department of Economics.
    20. Gauri, Dinesh K. & Ratchford, Brian & Pancras, Joseph & Talukdar, Debabrata, 2017. "An Empirical Analysis of the Impact of Promotional Discounts on Store Performance," Journal of Retailing, Elsevier, vol. 93(3), pages 283-303.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:puaesp:200407. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/dapurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.