Examining the performance index of retail pricing strategies under different types of competition Online publication date: Mon, 26-Nov-2018
by Ilyoung Jung; Imsu Park; Jeong Hoon Choi
International Journal of Revenue Management (IJRM), Vol. 10, No. 3/4, 2018
Abstract: This study aims to measure and compare the efficiency of two pricing strategies of retail chains, a Hi-Lo pricing strategy and an everyday low price (EDLP) strategy, according to different types of competition. This research suggests the speed of price adjustment approach to measure the efficiency of retail chains, and the nonlinear seemingly unrelated regression estimation captures the impacts of market competition. The findings suggest that, in highly competitive markets, the Hi-Lo chains show a greater speed of price adjustment, whereas a slower speed is shown in less concentrated markets. In particular, the Hi-Lo chains in the market leader position with the EDLP followers show that the speed of price adjustment is slower than in other markets. When Hi-Lo chains compete with each other in the same market, they offer price discounts more aggressively and adjust the price rapidly as a means to maintain their market position.
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