Monday, February 11, 2008
Posted by D. Daniel Sokol
On one of my favorite topics of supermarkets, a new paper by Monica Giulietti of Aston University Business School examines Buyer and Seller Power in Grocery Retailing: Evidence from Italy.
ABSTRACT: This work investigates the effect of upstream and downstream market concentration on retailers' price-cost margins using bimonthly data over the period 1989-1992 disaggregated by retailer type and product. In addition to horizontal concentration, differentiation, and cost factors, the analysis includes buyer power amongst the determinants of retailers' profitability, as a result of vertical bargaining. Using a fixed effects model in first differences we find evidence of bargaining activity between large chains and food manufacturers.
Our analysis of price competition at the retail level also reveals some interdependence in the pricing decisions of the largest retail organisations and price leadership by large independent shops.