Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/206763 
Year of Publication: 
1998
Citation: 
[Journal:] Managerial and Decision Economics [ISSN:] 1099-1468 [Volume:] 19 [Issue:] 2 [Publisher:] Wiley [Place:] Hoboken [Year:] 1998 [Pages:] 81-120
Publisher: 
Wiley, Hoboken
Abstract: 
We empirically study the price adjustment process at multiproduct retail stores. We use a unique store level data set for five large supermarket and one drugstore chains in the USA, to document the exact process required to change prices. Our data set allows us to study this process in great detail, describing the exact procedure, stages, and steps undertaken during the price change process. We also discuss various aspects of the microeconomic environment in which the price adjustment decisions are made, factors affecting the price adjustment decisions, and firm‐level implications of price adjustment decisions. Specifically, we examine the effects of the complexity of the price change process on the stores' pricing strategy. We also study how the steps involved in the price change process, combined with the laws governing the retail price setting and adjustment, along with the competitive market structure of the retail grocery industry, influence the frequency of price changes. We also examine how the mistakes that occur in the price change process influence the actions taken by these multiproduct retailers. In particular, we study how these mistakes can make the stores vulnerable to civil law suits and penalties, and also damage their reputation. We also show how the mistakes can lead to stockouts or unwanted inventory accumulations. Finally, we discuss how retail stores try to minimize these negative effects of the price change mistakes.
Subjects: 
Cost of Price Adjustment
Price Adjustment Process
Menu Cost
Posted Prices
Multiproduct Retailer
Price Rigidity
Sticky Prices
Frequency of Price Changes
Time Dependent Pricing
Retail Supermarket and Drugstore Chains
JEL: 
E31
E12
E50
G13
G14
L11
L15
L16
M21
M31
Q11
Q13
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)
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