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Price Flexibility In British Supermarkets: Moderation And Recession

Author

Listed:
  • Dixon, Huw
  • Seaton, Johathan S.
  • Waterson, Michael
Abstract
This paper delivers a significantly different empirical perspective on micro pricing behaviour and its impact on macroeconomic processes than previous studies, largely resulting from the fact that our weekly price data for the three major British supermarkets spans a seven year period including the crisis years 2008-2010. We find that there is a large and significant change in the behaviour of prices from 2008 onwards: prices change more frequently and the average duration of price spells declines significantly. Several of our findings run strongly counter to established empirical regularities, in particular the high overall frequency of regular or reference price changes we uncover, the greater intensity of change in more turbulent times and the numerical dominance of price falls over rises. The pricing behaviour revealed also significantly challenges the implicit assumption that prices are tracking cost changes.

Suggested Citation

  • Dixon, Huw & Seaton, Johathan S. & Waterson, Michael, 2014. "Price Flexibility In British Supermarkets: Moderation And Recession," Economic Research Papers 270246, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:270246
    DOI: 10.22004/ag.econ.270246
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    References listed on IDEAS

    as
    1. Philip Bunn & Colin Ellis, 2012. "Examining The Behaviour Of Individual UK Consumer Prices," Economic Journal, Royal Economic Society, vol. 122(558), pages 35-55, February.
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    11. Huw David Dixon & Kun Tian, 2017. "What We can Learn About the Behaviour of Firms from the Average Monthly Frequency of Price-Changes: An Application to the UK CPI Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(6), pages 907-932, December.
    12. Alberto Cavallo, 2018. "Scraped Data and Sticky Prices," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 105-119, March.
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    18. Huw Dixon & Jeremy Franklin & Stephen Millard, 2023. "Sectoral Shocks and Monetary Policy in the United Kingdom," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(4), pages 805-829, August.
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    Cited by:

    1. Chakraborty, Ratula & Dobson, Paul W. & Seaton, Jonathan S. & Waterson, Michael, 2015. "Pricing in inflationary times: The penny drops," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 71-86.
    2. Ray, Sourav & Snir, Avichai & Levy, Daniel, 2023. "Retail Pricing Format and Rigidity of Regular Prices," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-1.
    3. Rünstler, Gerhard & Bräuer, Leonie, 2020. "Monetary policy transmission over the leverage cycle: evidence for the euro area," Working Paper Series 2421, European Central Bank.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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