Identifying and characterising price leadership in British supermarkets
International Journal of Industrial Organization
Price leadership is a concept that lacks precision. We propose a deliberately narrow, falsifiable, definition then develop it, illustrate its feasibility and test it using the two leading British supermarket chains. We find both firms engaging in leading prices upward over a range of products, with the larger being initially more dominant but the smaller increasing leadership activity to take overall leadership over time. However, more price leadership events are price reductions than price
... ions than price increases, consistently led by the smaller firm. Nevertheless, the increases are of larger monetary amounts than the falls, so average basket price increases over time. for helpful comments and advice. Also we have benefitted from helpful discussions at CRESSE, Crete, 2012, the Office of Fair Trading, INRA Paris, seminar participants at the University of Bath and with an advisor to one of the companies in the industry. Michael Waterson is a member of the UK Competition Commission, but he was not involved in any of its inquiries into this industry nor has he had access to any data they collected that are not in the public domain. This paper should not be taken to reflect the views of the Competition Commission, or other public bodies.