Price rigidity and market power in German retailing

Sascha A. Weber and Sven M. Anders
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Sascha A. Weber: Justus-Liebig University, Giessen, Germany, Postal: Justus-Liebig University, Giessen, Germany
Sven M. Anders: University of Massachusetts, Amherst, MA, USA, Postal: University of Massachusetts, Amherst, MA, USA

Managerial and Decision Economics, 2007, vol. 28, issue 7, pages 737-749

Abstract: This paper presents empirical evidence on the interplay important topics of consumer price rigidity and market power in the German food retail industry. In particular, the analysis addresses the causal relationship between market structure-collusion-and pricing behaviour highlighted in the industrial organization literature. Extensive analysis of retail scanner data across beef and pork products reveals considerable differences in price rigidity across store types. Supermarket pricing behaviour is evaluated with respect to all price changes retail sales action and price adjustments indicating that food discounters exhibit the highest degree of rigid prices. Retail concentration, as an important explanatory factor of price stickiness is investigated via the analysis of retail market power employing a conjectural-variation approach. The analysis of market conduct in the marketing of beef and pork products indicates simultaneous oligopolistic and oligopsonistic behaviour of retail firms. Copyright © 2007 John Wiley & Sons, Ltd.

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