Sales Promotion and Cooperative Retail Pricing Strategies

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. We test this hypothesis using a sample of fresh produce pricing data from 20 supermarket chains in markets distributed throughout the U.S. Our results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.


Issue Date:
2004
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/28542
Total Pages:
36
Series Statement:
Working Paper MSABR 04-6




 Record created 2017-04-01, last modified 2017-08-24

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