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Abstract
The purpose of this paper is to study the price behaviour of fresh produce at the retail
level of two leading supermarkets, Tesco and Sainsbury, with the purpose of gaining
knowledge about their interaction. We focus the study on six products from the fresh
fruits and vegetable group (i.e., tomatoes, Bramley’s apples, white cabbage, cucumbers,
Iceberg lettuce and Round lettuce) due to the fact on the one hand it is a less complex
supply chain (e.g., perishable product, less number of intermediaries) and on the other
hand, because during the last 20 years the group has significantly evolved with
supermarkets becoming the major players in the chain. The empirical methodology
consisted of using Granger causality tests to establish the relationship between the
series (e.g., leader-follower) and then vector autoregressive (VAR) models and variance
decomposition procedures to capture the interaction of supermarket prices by product.
Overall results indicate that the competition behaviour amongst the two retailers
changes by product and evolve over time