Author: Pedro Valentim Marques

Publisher:

Published: 1982

Total Pages: 256

ISBN-13:

The main purpose of this study is to investigate the role of economic theory in the retail pricing process. Specifically, the objectives of this research are: 1) to establish a conceptual framework linkin retail prices to wholesale prices; 2) to identify parameters which can be considered important factors in retail pricing decisions; 3) to estimate parameters relating price variations at the retail level to prince variations at the wholesale level. The following hypotheses are tested: 1) whether retail price changes are spread out time; 2) whether particular price decisions are made taking into account the effects of those decisions on the overall level of the store's sales (systematic pricing behavior); 3) whether changes in princes at the wholesale level are equally passed on to retail consumers; 4) whether retail pricing decisions are made taking into account the competition's prices. After applying the economic principle of profit maximization subject to restrictions, the final model includes the retail price any individual good as the dependent variable. The explanatory variables are wholesale price, price of the same good sold by a competitor, the relative level of the good's sales to total sales of all other goods sold in the store. A lagged adjustment factor for the retail price of the product is also incorporated into the analysis. Retail and wholesale prices for 70 different items were collected from one supermarket. The same retail prices were collected from other supermarkets in the market area. The research concentrates on six meat products: hamburger, whole chicken fryer, t-bone steak, chuck blade pot roast and one-fourth pork loin.