Price Leadership in UK Food Retailing: Time Series Representation and Evidence

This paper analyses the price of a common basket of products sold in each of the UK’s four largest retail chains to assess propositions regarding price leadership. Data used in this investigation represent weighted average prices of a large group of branded and non-branded products purchased nationally at weekly intervals over a three and half year period and cover purchases in 37 product categories. The data are analysed using vector autoregressive methods, a convenient framework for a statistical investigation of this sort, owing to the time series properties that the price data exhibit. The paper introduces the concepts of strategic and tactical price leadership. Since these correspond to parameter restrictions in the vector autoregression, the statistical tests have a economically meaningful interpretation. While the empirical findings are preliminary, they indicate that Tesco, the largest of the retail chains, acts as price leader in both the strategic and tactical senses.

PRICE LINKAGES IN THE INTERNATIONAL WHEAT MARKET

This paper brings time series techniques to bear on the relationships between the prices of the principal types of wheat traded internationally. In all, the relationships between eleven wheat prices (categorised by wheat quality, harvest date and port of despatch) are scrutinised to uncover the structure of the wheat market implicit in the behaviour its prices reveal. The statistical evidence supports the notion of a highly integrated market that is segmented according to wheat strength-the principal determinant of end-use. Three segments are identified: a market for 'strong' (bread-making) wheat, another for 'weak' (confectionary products-making) wheat and a third for medium strength wheat suitable for unleavened breads and noodles. Whilst informative, market integration - detected by cointegration among prices - is not altogether surprising, yet the presence of cointegration implies a causal structure, which is of more cogent interest. Among a number of complementary techniques, linkages are uncovered using an innovative concept of irreducible cointegration vectors (Davidson 1998, Barassi et al 2001) which provides new evidence on price linkages. Statistical evidence is robust and not test-dependent. Specifically, we find a dominant price leader in each sub-market. In terms of its pricing, the EU is found to play a passive role in the world market, confirming a widely held view.Wheat market, price linkages, irreducible cointegration vectors, Crop Production/Industries, International Relations/Trade,

Do Sales Matter? Evidence from UK Food Retailing

This paper assesses the role of sales as a feature of price dynamics using scanner data. The study analyses a unique, high frequency panel of supermarket prices consisting of over 230,000 weekly price observations on around 500 products in 15 categories of food stocked by the UK’s seven largest retail chains. In all, 1,700 weekly time series are available at the barcode-specific level including branded and own-label products. The data allows the frequency, magnitude and duration of sales to be analysed in greater detail than has hitherto been possible with UK data. The main results are: (i) sales are a key feature of aggregate price variation with around 40 per cent of price variation being accounted for by sales once price differences for each UPC level across the major retailers are accounted for; (ii) much of the price variation that is observed in the UK food retailing sector is accounted for by price differences between retailers; (iii) only a small proportion of price variation that is observed in UK food retailing is common across the major retailers suggesting that cost shocks originating at the manufacturing level is not one of the main sources of price variation in the UK; (iv) own-label products also exhibit considerable sales behaviour though this is less important than sales for branded goods; and (v) there is some evidence of coordination in the timing of sales across retailers insofar as the probability of a sale at the UPC level at a given retailer increases if the product is also on sale at another retailer.Sales, price variation, retail, Consumer/Household Economics, Demand and Price Analysis, L16, L66, Q13.,

Buyer power in U.K. food retailing: a 'first-pass' test

Habtu Weldegebriel, University of Warwick Abstract The potential existence of buyer power in U.K. food retailing has attracted the scrutiny of the U.K.'s anti-trust authorities, culminating in the second of two comprehensive regulatory inquiries in recent years. Such inquiries are authoritative but correspondingly time-consuming and costly. Moreover, detection of buyer power has been dogged by the paucity of reliable evidence of its existence. In this paper, we present a simple theoretical model of oligopsony which delivers quasi-reduced form retailer-producer pricing equations with which the null of perfect competition can be tested using readily available market data. Using a cointegrated vector autoregression, we find empirical results that show the null of perfect competition can be rejected in seven of the nine food products investigated. Though not conclusive on the existence of buyer power, the proposed test offers a means via which the behaviour of the retail-producer price spread is consistent with it. At the very least, it can corroborate the concerns of the anti-trust authorities as to whether buyer power is potentially one source of concern

Buyer Market Power in UK Food Retailing

The potential existence of buyer market power in UK food retailing has attracted the scrutiny of the UK's anti-trust authorities, culminating in the decision to launch the second of two comprehensive regulatory inquiries in recent years. Throughout, detection of buyer power has been dogged by the paucity of reliable evidence of its existence. In this paper we present a simple theoretical model of oligopsony which delivers quasireduced form retailer-producer pricing equations in which the presence of market power can be detected using readily available market data. Using a cointegrated vector autoregression, we find empirical results that are consistent with the presence of oligopsony power in all six food products investigated.Buyer power, Cointegrated VARs, UK food industry, Agribusiness, Consumer/Household Economics,

Market Power in UK Food Retailing: Theory and Evidence from Seven Product Groups

Establishing the presence of market power in food chains has become an increasingly pertinent line of enquiry given the trend towards increasing concentration that has been observed in many parts of the world. This paper presents a theoretical model of price transmission in vertically related markets under imperfect competition. The model delivers a quasi-reduced form representation that is empirically tractable using readily available market data to test for the presence of market power. In particular, we show that the hypothesis of perfect competition can be rejected if shocks to the demand and supply function are significant and correctly signed in price transmission equations. Using a cointegrated vector autoregression, we find empirical results that are consistent with downstream market power in six out of seven food products investigated, supporting both the findings of the UK competition authority's recent investigation in to supermarkets and renewed calls for further scrutiny of supermarket behaviour by the UK's Office of Trading.imperfect competition, Cointegrated VARs, UK food industry, Marketing, D4, L81,

Explaining UK Food Price Inflation. (Transparency of Food Pricing (TRANSFOP) Working Paper 1)

Retail food price inflation in the UK peaked at nearly 14% in the summer of 2008, a level much higher than had been seen in the previous 10 years and, since then, food price inflation has continued to lead general inflation. An obvious factor driving domestic retail food prices is world commodity prices, but other factors matter too. In this paper, we model UK food price inflation and explore a range of potential drivers including world food prices, exchange rates, manufacturing costs, oil prices and wages. Over the period 1990-2010, we show that the major drivers of UK food price inflation are world raw food prices and the exchange rate; less important are manufacturing costs, unemployment and earnings. Oil prices matter too but indirectly via their effect on world agricultural commodity prices. We also show that the effect on domestic retail food price inflation depends on the duration of the shocks arising on world commodity markets

A Buffer Stocks Model for Stabilizing Price of Staple Food with Considering the Expectation of Non Speculative Wholesaler

This paper is a study of price stabilization in the staple food distribution system. All stakeholders experience market risks due to some possibility causes of price volatility. Many models of price stabilization had been developed by employing several approaches such as floor-ceiling prices, buffer funds, export or import taxes, and subsidies. In the previous researches, the models were expanded to increase the purchasing price for producer and decrease the selling price for consumer. Therefore, the policy can influence the losses for non-speculative wholesaler that is reflected by the descending of selling quantity and ascending of the stocks. The objective of this model is not only to keep the expectation of both producer and consumer, but also to protect non-speculative wholesaler from the undesirable result of the stabilization policy. A nonlinear programming model was addressed to determine the instruments of intervention program. Moreover, the result shows that the wholesaler behavior affects the intervention costs. Index Terms Buffer stocks, Price stabilization, Nonlinear programming, Wholesaler behavior

Evidence of Balanced Diversity at the Chicken Interleukin 4 Receptor Alpha Chain Locus

Background: The comparative analysis of genome sequences emerging for several avian species with thefully sequenced chicken genome enables the genome-wide investigation of selective processes infunctionally important chicken genes. In particular, because of pathogenic challenges it is expected thatgenes involved in the chicken immune system are subject to particularly strong adaptive pressure.Signatures of selection detected by inter-species comparison may then be investigated at the populationlevel in global chicken populations to highlight potentially relevant functional polymorphisms.Results: Comparative evolutionary analysis of chicken (Gallus gallus) and zebra finch (Taeniopygia guttata)genes identified interleukin 4 receptor alpha-chain (IL-4Rα), a key cytokine receptor as a candidate with asignificant excess of substitutions at nonsynonymous sites, suggestive of adaptive evolution. Resequencingand detailed population genetic analysis of this gene in diverse village chickens from Asia and Africa,commercial broilers, and in outgroup species red jungle fowl (JF), grey JF, Ceylon JF, green JF, grey francolinand bamboo partridge, suggested elevated and balanced diversity across all populations at this gene, actingto preserve different high-frequency alleles at two nonsynonymous sites.Conclusion: Haplotype networks indicate that red JF is the primary contributor of diversity at chickenIL-4Rα: the signature of variation observed here may be due to the effects of domestication, admixtureand introgression, which produce high diversity. However, this gene is a key cytokine-binding receptor inthe immune system, so balancing selection related to the host response to pathogens cannot be excluded

Tracing carbon and nitrogen microbial assimilation in suspended particles in freshwaters

The dynamic interactions between dissolved organic matter (DOM) and particulate organic matter (POM) are central in nutrient cycling in freshwater ecosystems. However, the molecular-level mechanisms of such interactions are still poorly defined. Here, we study spatial differences in the chemical (i.e., individual proteinaceous amino acids) and microbial (i.e., 16S rRNA) composition of suspended sediments in the River Chew, UK. We then applied a compound-specific stable isotope probing (SIP) approach to test the potential assimilation of 13C,15N-glutamate (Glu) and 15N-NO3− into proteinaceous biomass by particle-associated microbial communities over a 72-h period. Our results demonstrate that the composition of suspended particles is strongly influenced by the effluent of sewage treatment works. Fluxes and percentages of assimilation of both isotopically labelled substrates into individual proteinaceous amino acids showed contrasting dynamics in processing at each site linked to primary biosynthetic metabolic pathways. Preferential assimilation of the organic molecule glutamate and evidence of its direct assimilation into newly synthesised biomass was obtained. Our approach provides quantitative molecular information on the mechanisms by which low molecular weight DOM is mineralised in the water column compared to an inorganic substrate. This is paramount for better understanding the processing and fate of organic matter in aquatic ecosystems