Sales Promotion and Cooperative Retail Pricing Strategies

Timothy Richards and Paul Patterson

Review of Industrial Organization, 2005, vol. 26, issue 4, 413 pages

Abstract: Supermarket retailers make strategic pricing decisions in a high-frequency, repeated game environment both in buying and selling fresh produce. In this context, there is some question as to whether a non-cooperative equilibrium can emerge that produces margins above the competitive level. Supermarket pricing results from tacitly collusive equilibria supported by trigger price strategies played in upstream markets. Upstream activities are, in turn, driven by periodic retail price promotions. This hypothesis is tested using a sample of fresh produce pricing data from 20 US supermarket chains. The results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets. Copyright Springer 2005

Keywords: Dynamics; game theory; Nash equilibrium; perishables; supermarkets; tacit collusion (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s11151-005-0182-y

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