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Farmgate prices, retail prices, and supermarkets' pricing decisions: An integrated approach
Author(s) -
Russo Carlo,
Goodhue Rachael
Publication year - 2017
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.21530
Subject(s) - econlit , market power , economics , volatility (finance) , competition (biology) , econometrics , microeconomics , industrial organization , ecology , medline , political science , law , biology , monopoly
Agricultural and food prices exhibit several empirical regularities that are not easily explained by conventional perfect competition or market power models, including asymmetric price transmission, food price rigidity, farmgate price volatility, and low correlation between prices at different stages of the supply chain. We focus on this set of market features and conclude that they can be the outcome of a competition model where supermarket use promotions to strategically attract basket shoppers. We present a numerical simulation to show that complex price patterns including all the features indicated above can be obtained from a general store traffic competition model without the need of introducing ad hoc assumptions. [EconLit citations: Q11, Q13].