Price Sensitivity Within and Across Retail Formats

Abstract

Applying a synthetic demand system approach, we examine if consumers in discount stores reveal different price elasticities of demand than those in conventional supermarkets. Based on a RollAMA dataset containing information on consumption in 12 different retail chains in Austria, we first analyze demand patterns for a scenario in which consumers only frequent either discounters or supermarkets, followed by an investigation of potential cross-format effects when both types of stores are visited. Our empirical findings suggest that for the three categories of milk products under examination, price elasticities in discount stores are generally higher. Beyond that, demand reactions in supermarkets with respect to price changes in discounters differ from the reverse case, i.e., from demand reactions in discounters when supermarket prices are changed. This is especially true for the case of drinking milk, which confirms the strategic potential of drinking milk as a loss leader product.

A study of food retailing: How does consumer price sensitivity vary across food categories and retailer types in Mexico?

“…Previous researchers examined price sensitivity for one retail category, dairy products. (e.g., Kinoshita et al, 2001;Widenhorn & Salhofer, 2014). Our study provides insights into a wider range of food categories in terms of consumer price sensitivity at the focal retailer in response to own or competitor price changes.…”