| The overall purpose of this research is to investigate empirically how conventional supermarkets set their prices and promotions and to describe the nature of competition between rival chains. In this dissertation I focus on two major conventional supermarket chains that operate mostly in the western United States: Safeway and Albertsons. I utilize a unique data set that is nearly comprehensive in its coverage of weekly prices and promotions for both chains in several US cities over a period of time from June, 2008 through September, 2009.;The majority of the research published in economics and marketing journals pertaining to food retail is either theoretical in nature or uses a small number of products to generalize supermarket behavior to the entire store. The richness of my dataset allows me to make substantial contributions to the understanding of how supermarkets behave, in practice, and a deeper understanding of supermarket behavior is motivated due to the fact that market power in American agribusiness has become concentrated in the retail sector.;Each of the three empirical chapters herein expands and updates the literature on an industry of great importance to consumers, all of agribusiness, and the economy as a whole. I find that price promotions are a heavily-used tool in interstore competition among supermarkets, as retailers are likely to respond to competitors' advertised promotions with similar promotions within a short window of time. Promotional competition is stronger for national brands and perishable products than for private labels. I demonstrate that the decision rule for setting price promotions depends on a number of factors previously not considered in the literature, in particular complementarity across product categories. This dissertation also investigates the nature of national brand/private label interaction in today's marketplace, where private labels are rapidly growing in quality, price, and prevalence. Overall, national brands and private labels share a competitive relationship within stores as the average price margin between the two product lines continues to fall. |
