This article measures promotional competition between two major supermarket chains in the United States. The approach does not rely upon quantity sales data and can be applied to any industry that features advertised sales. The results indicate that retailers do compete using promotions. A supermarket promotion in one week significantly increases the probability of a promotion for the same product at rival stores in the following week. Additionally, competitors seek to match or exceed the price cuts of their rivals when responding to promotions. Oligopolistic competition plays a significant role in determining the timing of sales and retail price variation.
Review of Industrial Organization – Springer Journals
Published: Apr 15, 2012
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