Do supermarket prices change from week to week?

Colin Ellis (colin.ellis@daiwasmbc.co.uk)
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Colin Ellis: Daiwa Securities SMBC Europe Ltd

No 378, Bank of England working papers from Bank of England

Abstract: This paper examines the behaviour of supermarket prices in the United Kingdom, using weekly scanner data supplied by Nielsen. A number of stylised facts about pricing behaviour are uncovered. First, prices change very frequently in supermarkets, with 40% of prices changing each week, and even controlling for ‘temporary’ changes, a quarter of prices change each week. Importantly, there is evidence that focusing on monthly observations, rather than weekly ones, overstates the implied stickiness of prices. Second, the probability of price changes is not constant over time – all product categories have declining hazard functions. Third, the range of price changes is very wide, with some very large price cuts and price rises; but despite this, a significant number of price changes are very small. Fourth, there appears to be little link between the frequency and magnitude of price changes – prices that change less frequently do not tend to change by more. Fifth, the strongest correlation between price and volume changes is contemporaneous, suggesting that prices and volumes move together from week to week. And sixth, rough analysis based on simplifying assumptions suggests that consumers are fairly price sensitive: volumes change by more than prices.

Keywords: Supermarket prices; behaviour of prices; demand elasticities (search for similar items in EconPapers)
JEL-codes: D40 E31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-11-27
New Economics Papers: this item is included in nep-cba, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0378

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