IDEAS home Printed from https://ideas.repec.org/p/ags/aaea07/9833.html
   My bibliography  Save this paper

Competition Effects of Supermarket Services

Author

Listed:
  • Bonanno, Alessandro
  • Lopez, Rigoberto A.

Abstract

This paper investigates the effect of in-store services on retail food prices, supermarket competition, and demand using fluid milk as a case study. It is shown that higher-service supermarkets charge higher milk prices essentially because of an increase in market power due to differentiation of service offering. Results show that different types of services impact milk prices differently, that upscale food-retailers face stronger competition in newer services, and that service competition results in a trade-off for the consumer between the attractiveness of the enhanced retail configuration and the increase in prices.

Suggested Citation

  • Bonanno, Alessandro & Lopez, Rigoberto A., 2007. "Competition Effects of Supermarket Services," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9833, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea07:9833
    DOI: 10.22004/ag.econ.9833
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/9833/files/sp07bo02.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.9833?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rigoberto Lopez & Azzeddine Azzam & Carmen Lirón-España, 2002. "Market Power and/or Efficiency: A Structural Approach," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(2), pages 115-126, March.
    2. Slade, Margaret E, 1995. "Product Rivalry with Multiple Strategic Weapons: An Analysis of Price and Advertising Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 445-476, Fall.
    3. John Barron & Beck Taylor & John Umbeck, 2001. "New evidence on price discrimination and retail configuration," Applied Economics Letters, Taylor & Francis Journals, vol. 8(2), pages 135-139.
    4. David Besanko & Sachin Gupta & Dipak Jain, 1998. "Logit Demand Estimation Under Competitive Pricing Behavior: An Equilibrium Framework," Management Science, INFORMS, vol. 44(11-Part-1), pages 1533-1547, November.
    5. Ronald W. Cotterill & Tirtha Pratim Dhar, 2003. "Oligopoly Pricing with Differentiated Products: The Boston Fluid Milk Market Channel," Food Marketing Policy Center Research Reports 074, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    6. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-391, June.
    7. Roger Betancourt & David Gautschi, 1990. "Demand Complementarities, Household Production, and Retail Assortments," Marketing Science, INFORMS, vol. 9(2), pages 146-161.
    8. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
    9. repec:bla:jindec:v:45:y:1997:i:4:p:377-86 is not listed on IDEAS
    10. Roller, Lars-Hendrik & Sickles, Robin C., 2000. "Capacity and product market competition: measuring market power in a 'puppy-dog' industry," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 845-865, August.
    11. Jean Kinsey & Ben Senauer, 1996. "Consumer Trends and Changing Food Retailing Formats," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(5), pages 1187-1191.
    12. Alessandro Bonanno & Rigoberto A. Lopez, 2004. "Private Labels, Retail Configuration, and Fluid Milk Prices," Food Marketing Policy Center Research Reports 082, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    13. Benaissa Chidmi & Rigoberto A. Lopez & Ronald W. Cotterill, 2005. "Retail oligopoly power, dairy compact, and Boston milk prices," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 477-491.
    14. Howard Smith, 2004. "Supermarket Choice and Supermarket Competition in Market Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 235-263.
    15. Timothy J. Richards & Stephen F. Hamilton, 2006. "Rivalry in Price and Variety among Supermarket Retailers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 710-726.
    16. Betancourt, Roger R & Gautschi, David A, 1993. "The Outputs of Retail Activities: Concepts, Measurement and Evidence from U.S. Census Data," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 294-301, May.
    17. Rajiv Lal & Ram Rao, 1997. "Supermarket Competition: The Case of Every Day Low Pricing," Marketing Science, INFORMS, vol. 16(1), pages 60-80.
    18. Ellickson, Paul B., 2006. "Quality competition in retailing: A structural analysis," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 521-540, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bonanno, Alessandro & Chenarides, Lauren & Goetz, Stephan J., 2012. "Limited Food Access as an Equilibrium Outcome: An Empirical Analysis," 2012 AAEA/EAAE Food Environment Symposium 123196, Agricultural and Applied Economics Association.
    2. Stephen Martin, 2012. "Market Structure and Market Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(2), pages 87-108, March.
    3. Andreas Widenhorn & Klaus Salhofer, 2014. "Price Sensitivity Within and Across Retail Formats," Agribusiness, John Wiley & Sons, Ltd., vol. 30(2), pages 184-194, March.
    4. Davis, David E., 2009. "Price and promotion effects of supermarket mergers," SDSU Working Papers in Progress 12009, South Dakota State University, Department of Economics, revised Jun 2010.
    5. Bonanno, Alessandro & Ghosh, Gaurav S., 2010. "SNAP Efficacy and Food Access – A Nationwide Spatial Analysis," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116437, European Association of Agricultural Economists.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlo Russo & Rachael Goodhue, 2018. "Farmgate prices, retail prices, and supermarkets' pricing decisions: An integrated approach," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 24-43, December.
    2. Kopalle, Praveen & Biswas, Dipayan & Chintagunta, Pradeep K. & Fan, Jia & Pauwels, Koen & Ratchford, Brian T. & Sills, James A., 2009. "Retailer Pricing and Competitive Effects," Journal of Retailing, Elsevier, vol. 85(1), pages 56-70.
    3. Timothy Richards, 2007. "A nested logit model of strategic promotion," Quantitative Marketing and Economics (QME), Springer, vol. 5(1), pages 63-91, March.
    4. Richards, Timothy J. & Hamilton, Stephen F. & Patterson, Paul M., 2010. "Spatial Competition and Private Labels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(2), pages 1-26, August.
    5. Bonanno, Alessandro & Chenarides, Lauren & Goetz, Stephan J., 2012. "Limited Food Access as an Equilibrium Outcome: An Empirical Analysis," 2012 AAEA/EAAE Food Environment Symposium 123196, Agricultural and Applied Economics Association.
    6. Pradeep Chintagunta & Jean-Pierre Dubé & Vishal Singh, 2003. "Balancing Profitability and Customer Welfare in a Supermarket Chain," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 111-147, March.
    7. Paul B. Ellickson & Sanjog Misra, 2008. "Supermarket Pricing Strategies," Marketing Science, INFORMS, vol. 27(5), pages 811-828, 09-10.
    8. Smith, Howard & Thomassen, Øyvind, 2012. "Multi-category demand and supermarket pricing," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 309-314.
    9. Benaissa Chidmi & Rigoberto A. Lopez & Ronald W. Cotterill, 2005. "Retail oligopoly power, dairy compact, and Boston milk prices," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 477-491.
    10. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series 2597, CESifo.
    11. Rebecca Cleary & Jean-Paul Chavas, 2022. "Strategic supermarket pricing of private labels and manufacturer brands," Empirical Economics, Springer, vol. 62(6), pages 2921-2950, June.
    12. Rebecca L. O. Cleary & Rigoberto A. Lopez, 2007. "Is Wal-Mart Good for Competition? Evidence from Milk Prices," Food Marketing Policy Center Research Reports 101, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    13. Castellari, Elena & Moro, Daniele & Platoni, Silvia & Sckokai, Paolo, 2018. "Retailers’ strategies and food price dynamics: Evidence from dairy scanner data," Food Policy, Elsevier, vol. 74(C), pages 212-224.
    14. repec:got:cegedp:66 is not listed on IDEAS
    15. Alessandro Bonanno & Rigoberto A. Lopez, 2004. "Private Labels, Retail Configuration, and Fluid Milk Prices," Food Marketing Policy Center Research Reports 082, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    16. Basker, Emek & Vickers, Chris & Ziebarth, Nicolas L., 2018. "Competition, productivity, and survival of grocery stores in the Great Depression," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 282-315.
    17. Villas-Boas, Sofia B & Klapper, Daniel & Draganska, Michaela, 2010. "A Larger Slice or a Larger Pie? Investigating Margins in the Distribution Channel," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt064044x8, Department of Agricultural & Resource Economics, UC Berkeley.
    18. Irz, Xavier & Mazzocchi, Mario & Réquillart, Vincent & Soler, Louis-Georges, 2015. "Research in Food Economics: past trends and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 187-237, March.
    19. Rennhoff, Adam D., 2004. "Paying For Shelf Space: An Investigation Of Merchandising Allowances In The Grocery Industry," Research Reports 25155, University of Connecticut, Food Marketing Policy Center.
    20. Volpe, Richard J., III, 2011. "Evaluating the Performance of U.S. Supermarkets: Pricing Strategies, Competition from Hypermarkets, and Private Labels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(3), pages 1-16, December.
    21. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.

    More about this item

    Keywords

    Agribusiness;

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea07:9833. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.