The Anatomy of Retail Price Competition: A Study of Advertised Food Prices

by Reed Hertford, Lee Preston



This article focuses on the retail price competition and the role of advertising in it. In any local market there are likely to be a number of food stores or supermarkets of varying size offering a wide range of closely substitutable products. The primary medium for the advertising of these firms is the local newspaper, and the primary content of this advertising is the prices of some of these products. The emphasis upon non-price elements of retail competition in recent years, elements such as product-mix, location, parking, and the elusive "store image," has produced a corresponding decline in interest in price competition. Although this shift of emphasis is in part a reflection of economic reality in an affluent society, an obvious attribute of retail markets is the continuing prevalence of price advertising. In analyzing the content of this advertising as evidence of the presence or absence of price competition, multi-dimensionality of price competition has been discovered as of the competitiveness of the prices themselves.

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