Antitrust analysis of supermarkets: global concerns playing out in local markets

This paper reviews the basic components of antitrust analysis for the supermarket industry, including definition of product and geographic markets and the measurement of market power. The analysis of prices and profits in a market structure context remains important, especially in countries such as Australia with very high supermarket concentration. Firm and brand level New Empirical Industrial Organisation models of demand and oligopoly pricing also provide insights for evaluating antitrust claims. Recent research on vertical pricing games and price transmission expand the analysis to market channel pricing issues, including coalescing power by supermarkets and food manufacturers. The issues and approaches explained in this paper are relevant for policy-orientated research on supermarkets worldwide, including Australia.market concentration, market definition, Nash–Bertrand conduct, price–cost margin, price transmission rate, unilateral and coordinated market power, Agribusiness, Industrial Organization,

National Brand and Private Label Pricing and Promotional Strategy

In this paper I use a unique and rich data set on prices and promotions from major US supermarkets to examine the nature of National Brand and Private Label interaction. Private labels are priced and promoted competitively with NBs, in a manner suggesting that retails are careful not to lose private label market share during times of national brand promotions. The price margin between the two types of products continues to fall in US supermarkets, and the major determinants of the price differences between the two are promotional frequency and market concentration.food retail, industrial organization, food prices, promotional activity, Agribusiness, Demand and Price Analysis, Industrial Organization, Marketing,

Duopoly Competition in Supermarket Industry: The Case of Seattle-Tacoma Milk Market

The Seattle-Tacoma consumers have been paying higher prices for fresh milk than consumers in other Western states of United States. For instance, the retail price for whole milk averaged $3.27/gallon during the period of April 1999- April 2003 in Seattle-Tacoma, while it did not go beyond$2.86/gallon in most of the large metropolitan areas in Western U.S, during the same period (Carman and Sexton, 2006). In addition, retail prices in Seattle-Tacoma do not respond similarly to farm price increases and decreases. Supermarkets are prompt to pass on to consumers any increase in farm price, while they do not pass or lag behind when farm price decreases. The present study attempts to analyze the pricing conduct of supermarket chains in a duopoly setting using a structural model of consumers and firms behavior. In this paper, we examine the pricing conduct of two supermarket chains using retail supermarket-level data on sales and prices from Seattle-Tacoma market area.Agribusiness, Demand and Price Analysis,

Commodity Price Pass-Through in Differentiated Retail Food Markets

Prices for nearly all basic commodity rose at unprecedented rates throughout early 2008, only to fall nearly as fast as financial markets and global economies began to collapse. Rising food prices in 2008 led to concerns that commodity price spikes would lead to more general food inflation, but by early 2009 interest focused more on the seeming inability of food prices to fall back down with commodity prices. This study provides an empirical investigation into the pass-through of commodity prices to retail prices for two different types of food products: potatoes and fluid milk. The results show that pass-through depends on the nature of the food in question, but is generally consistent with theoretical models of pricing by sellers of multiple, differentiated products. In particular, pass-through rates tend to be lower for processed (differentiated) products during periods of falling input prices than when input prices are rising. For less processed products, pass-through tends to be higher during regimes of both rising and falling input prices. Our results show that pass-through depends on the degree of pricing power possessed by all channel members and, more generally, suggest a nuanced approach to understanding retail food price inflation.commodity prices, conduct, industrial organization, inflation, market power, nested logit, pass-through, random parameters model, Consumer/Household Economics, Demand and Price Analysis, Industrial Organization, C35, D12, D43, L13, L41, Q13,

Spatial Competition in Private Labels

Previous studies find that private labels increase retailers' bargaining power with manufacturers and allow retailers to price discriminate. We use a spatial discrete choice model to show that retailers also use store brands to create market power through store differentiation, but not as a means of building market share.Marketing,

Dynamic Explanations of Industry Structure and Performance

Industrial Organization,

EVOLVING RESEARCH ON PRICE COMPETITION IN THE GROCERY RETAILING INDUSTRY: AN APPRAISAL

With the end of the Supermarket Revolution in the 1970s, new forms of horizontal, vertical, and geographic competition have appeared to challenge the supremacy of the supermarket format. New retail formats like warehouse stores, supercenters, and fast-food outlets appear to affect local retail supermarket prices. Slotting allowances, coupons, and electronic data gathering have intensified retailer-manufacturing rivalry. Foreign direct investment offers the promise of new European-style management styles in U.S. grocery retailing.Agribusiness, Demand and Price Analysis,