Identifying and characterising price leadership in British supermarkets

Posted by D. Daniel Sokol

Jonathan S. Seaton (Loughborough University) and Michael Waterson (University of Warwick) are Identifying and characterising price leadership in British supermarkets.

ABSTRACT: Price leadership is a concept that lacks precision. We propose a deliberately narrow, falsifiable, definition and illustrate its feasibility using the two leading British supermarket chains. We find both firms engaging in leadership behaviour over a range of products, with the larger being somewhat more dominant but the smaller increasing leadership activity over time. Surprisingly, more price leadership events are price reductions than price increases, but the increases are of larger monetary amounts (so average price increases over time) and the events appear not necessarily related to cost changes. Price leadership appears to play some role in price increases.