How do Everyday-Low-Price Supermarkets Adjust Their Prices?

Guojun He (), Jeffrey T. LaFrance (), Jeffrey Perloff and Richard Volpe ()
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Guojun He: University of Hong Kong
Jeffrey T. LaFrance: Monash University
Richard Volpe: California Polytechnic State University

Review of Industrial Organization, 2024, vol. 64, issue 1, No 6, 117-146

Abstract: Abstract Was the rapid increase and collapse of commodity prices in 2007–2009 passed through to supermarket prices symmetrically? This study is the first to address this issue for an everyday-low-price (EDLP) supermarket chain, which infrequently changes its prices and rarely has sales. We also reexamine the question for typical firms that set a usual high price and have frequent sales. We examine 25 goods that use a primary commodity (such as rice in a bag of rice). We fail to reject symmetric adjustments for very few goods for both types of stores. In addition, we find that the probability an EDLP chain adjusts its prices in response to even a large commodity price shock is low for most goods.

Keywords: Everyday-low-price supermarkets; Asymmetric price transmission; Food prices; Price adjustment; Retail price; Time series (search for similar items in EconPapers)
JEL-codes: C22 D40 Q13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11151-023-09922-0

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