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Sales Promotion and Cooperative Retail Pricing Strategies

Review of Industrial Organization volume 26, pages 391–413 (2005)Cite this article

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.

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Authors and Affiliations

  1. Morrison School of Agribusiness, Arizona State University, 7001 E. Williams Field Road, Building 130, Mesa, AZ, 85212, USA

    Timothy J. Richards & Paul M. Patterson

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  1. Timothy J. Richards
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  2. Paul M. Patterson
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Correspondence to Timothy J. Richards.

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Richards, T.J., Patterson, P.M. Sales Promotion and Cooperative Retail Pricing Strategies. Rev Ind Organ 26, 391–413 (2005). https://doi.org/10.1007/s11151-005-0182-y

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  • DOI: https://doi.org/10.1007/s11151-005-0182-y

Keywords

  • Dynamics
  • game theory
  • Nash equilibrium
  • perishables
  • supermarkets
  • tacit collusion