Do Supermarket Prices Change from Week to Week?

28 Pages Posted: 27 Nov 2009

See all articles by Colin Ellis

Colin Ellis

Hult International Business School (London)

Date Written: September 25, 2009

Abstract

This paper examines the behaviour of supermarket prices in the United Kingdom, using weekly scanner data supplied by Nielsen. A number of stylised facts about pricing behaviour are uncovered. First, prices change very frequently in supermarkets, with 40% of prices changing each week, and even controlling for ‘temporary’ changes, a quarter of prices change each week. Importantly, there is evidence that focusing on monthly observations, rather than weekly ones, overstates the implied stickiness of prices. Second, the probability of price changes is not constant over time - all product categories have declining hazard functions. Third, the range of price changes is very wide, with some very large price cuts and price rises; but despite this, a significant number of price changes are very small. Fourth, there appears to be little link between the frequency and magnitude of price changes - prices that change less frequently do not tend to change by more. Fifth, the strongest correlation between price and volume changes is contemporaneous, suggesting that prices and volumes move together from week to week. And sixth, rough analysis based on simplifying assumptions suggests that consumers are fairly price sensitive: volumes change by more than prices.

Keywords: Supermarket prices, behaviour of prices, demand elasticities

JEL Classification: D40, E31

Suggested Citation

Ellis, Colin, Do Supermarket Prices Change from Week to Week? (September 25, 2009). Bank of England Working Paper No. 378, Available at SSRN: https://ssrn.com/abstract=1514355 or http://dx.doi.org/10.2139/ssrn.1514355

Colin Ellis (Contact Author)

Hult International Business School (London) ( email )

35 Commercial Road
London, E1 1LD
United Kingdom

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