Price dispersion and strategic outcomes : an analysis of the Irish independent grocery sector

Abstract

This paper empirically analyses price dispersion between brand within product catgories in the Independent grocery sector. The methodology adopted allows us to discriminate between the impact which various structural demand and supply side features have on price dispersion in both traditional and game-theoretic frameworks. Specifically we estimate how differences in the product cycle, sales structure, distribution structure, and downstream retailer power impact patterns of price dispersion while controlling for idiosyncratic product effects. Our results suggest that competitive pricing of brands in product categories, and hence price dispersion, will rise with a slump in the product cycle, fragmentation in the sales structure, greater distribution coverage in outlets, and factors which restrict downstream retailer power.