The effects of geographical competition and demand on grocery price premium
Halme, Kari; Akpinar, Murat; Neuvonen, Heidi (2016)
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Halme K., Akpinar M., Neuvonen H., (2016). The effects of geographical competition and demand on grocery price premium. , Finnish Business Review. 17.3.2016.., Jyväskylän ammattikorkeakoulu. URN:NBN:fi:amk-201604124198
Due to the duopolistic characteristics of the Finnish grocery retail trade proprietor-run stores operate as adaptive price setters on the market. This paper examined the effects of geographical competition and demand on proprietor-run grocery stores’ pricing in Finland’s most populated province –Uusimaa. The assumption is that the price premium of a proprietoroperated store compared to the nearest co-operative competitor reflects the characteristics of competition and demand. Hypotheses on the influence of competition environment and demand environment on proprietor-operated store’s price premium were constructed based on literature review. The respective prices of a twelve-item shopping basket were collected for the study by on-site observations in all of the supermarkets and hypermarkets in Uusimaa. A linear multiple regression analysis showed a statistical significance in explaining the price premium by average home floor space in a store’s catchment area and store format compared to the closest co-operative competitor. A semiparametric geographically weighted regression slightly improves the linear model.