The Long Run, Market Power and Retail Pricing

Abstract

The paper uses the Johansen cointegration approach to analyse long-run pricing strategies of pork and chicken retailers in Austria. Long-run retail pricing strategy is found to be dependent on market share and price elasticity of demand for product. A combination of mark-up pricing strategy for pork and a competitive pricing strategy for chicken is considered by retailers to yield maximum profit. Long-run price adjustment reveals linkages to pricing strategy. The versatility of the Johansen cointegration technique as a tool capable of analysing both competitive and imperfect market situations is also revealed. The paper recommends meat policy to be product specific rather than holistic.Market power, Markup pricing, Cointegration, Long run