Farmgate versus retail prices and supermarkets’ pricing decisions: an integrated approach

Carlo Russo and Rachael Goodhue

No 182779, 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia from European Association of Agricultural Economists

Abstract: Food and agricultural commodity prices exhibit several empirical regularities, including asymmetric price transmission, higher farmgate price volatility, and relatively low correlation between farmgate and retail prices. Supermarket pricing behaviors include promotions, loss-leaders, and unadvertised sales. Existing explanations tend to focus on either the behavior of farmgate and retail prices or on supermarkets’ pricing decisions. We develop a model that integrates them. It has three core assumptions: consumers are basket shoppers, each consumer has a preferred store, and consumers cannot observe the full set of prices freely before entering the store. The phenomena listed above are all outcomes of the model.

Keywords: Consumer/Household; Economics (search for similar items in EconPapers)
Pages: 14
Date: 2014-08
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae14:182779

DOI: 10.22004/ag.econ.182779

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