How do retailers compete on price promotions? Evidence from a temporary promotion ban in Belgium

Jean Hindriks, Leonardo Madio and Valerio Serse
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Leonardo Madio: Université catholique de Louvain, LIDAM/CORE, Belgium

No 2022005, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In March 2020, the Belgian government imposed a two-week promotion ban to contain panic buying at the beginning of the Covid-19 Pandemic. Using a unique daily dataset tracking list prices and promotions in different retail chains at the store level, we investigate how retailers set price promotions once the ban was lifted. We find that both frequency and size of promotions reverted to the pre-ban but only several months after the ban was lifted. This effect presents large heterogeneity across retailers: one chain acted as a promotion leader, reintroducing promotions quicker than others. Another large chain acted as a promotion follower, reintroducing promotions more gradually but eventually setting more frequent and larger price promotions than in the pre-ban period. Overall, the promotion ban was a major factor driving up sale prices in Belgian stores.

Keywords: Price promotions; promotion ban; retailers; competition (search for similar items in EconPapers)
JEL-codes: D22 E30 E31 L11 (search for similar items in EconPapers)
Pages: 11
Date: 2022-02-01
New Economics Papers: this item is included in nep-com, nep-ind, nep-mac and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2022005

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