Price Dispersion and Strategic Outcomes: An Analysis of the Irish
Independent Grocery Sector
JEL Classification K21
Patrick P. Walsh and Ciara Whelan
Department of Economics, Trinity College, Dublin 2, Ireland.
AbstractThis 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.
AcknowledgementsThis paper was presented to the Irish Economic
Association in April 1997 and to the Department of Economics in Heriot-Watt
University in May 1997. We thank all participants for their comments. Special
thanks are extended to AC Nielsen Ltd. in Ireland for providing the data which
made this research possible.