The nature of competition in food retailing units: A Tucson case study

Abstract

The purpose of this study was to analyze price variations across the city of Tucson to determine whether any systematic patterns of noncompetitive pricing existed and to explore their causes. Prices were examined for three alternative baskets which consisted of (1) national brand items; (2) house brand items; and (3) the cheapest brand items. Also, several characteristics pertaining to firm size, competition level, and neighborhood demographics were examined to determine their effects on the price of the national brand basket. And finally, average weekly prices were examined to determine the effect of the week on the prices of the three alternative baskets. Ordinary least squares regression equations showed that only those variables related to the competition level were significant in influencing the price of the basket. In addition it was found that price differences were brand specific. That is, BRAND1 prices were found to be higher on the south side of town, whereas BRAND3 prices were highest on the north side of town. Similar results were found when looking at the number of close rivals, stores within the same chain, and the week of the month.