Rivalry in Price and Variety among Supermarket Retailers

Timothy J. Richards and Stephen F. Hamilton ()

American Journal of Agricultural Economics, 2006, vol. 88, issue 3, pages 710-726

Abstract: Recent theoretical models of retail competition suggest that product heterogeneity is critical to retail price and variety strategies. This article provides empirical evidence on supermarket retailers' price and variety strategies using a nested constant elasticity of substitution (NCES) modeling framework. The model is estimated using chain-level scanner data for four major grocery chains in a large, urban West Coast market. The results show that retailers compete for market share using both price and variety. While they all tend to follow moderately cooperative pricing strategies, the extent to which they follow cooperative strategies in variety is less homogeneous. Copyright 2006 American Agricultural Economics Association.

Date: 2006
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American Journal of Agricultural Economics is edited by Peter Berck, Robert J. Myers, Ian M. Sheldon and B. Wade Brorsen

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