Michael Waterson (University of Warwick), “Asymmetric price adjustment under rivalry in UK food retailing”, Agricultural and Food Industrial Organization Seminar, Toulouse : TSE, April 26, 2010, 11:00–12:30, room MF 323.
Modern consumers face a formidable problem when purchasing everyday products. In a large supermarket expedition, they are confronted with tens of thousands of lines. Hence they may rationally be inattentive (Chen et al., 2008) as to the pricing of individual lines. Whether consumers are rationally or irrationally inattentive, we may expect sellers at least to take that behaviour into consideration in their price-setting actions. Given this, together with the degree of rivalry exhibited by the leading UK supermarket groups, it is surprising that there has been rather little examination of the interplay between sellers in determining price patterns over time in a supermarket setting. In this paper, we make use of a significant source of data on prices of precisely specified lines of goods across all major supermarket chains in the UK in order to tease out patterns, and solve a puzzle, in supermarket pricing at a recent time of inflation in underlying commodity prices.