Analysis of threshold cointegration with asymmetric adjustments in the Hong Kong grocery industry

Woo, Kai-Yin; Lee, Shu-Kam; Shum, Paul

doi:10.1080/00036846.2017.1313959

Cited by 2 publications

(2 citation statements)

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“…The nonlinear cointegration relationship between prices that are in the form of discontinuous or nonlinear price reaction functions may be caused by various theoretical reasons such as nonlinear demand functions (Maskin & Tirole, 1988;Cowan, 2007), spatial product differentiation (Tabuchi & Thisse, 1995;Martin, 2002;Scrimitore, 2003) and game-theoretical strategic behaviours (Dhar et al 2005;Xu & Hajek, 2013). Empirically, existence of transportation costs and measurement errors in data (Taylor, 1988), and asymmetric price competition dynamics (Woo et al, 2017) may also lead to the rejection of linear cointegration relationship between retailer prices. Notes: A constant and a linear trend are included in the ADF regression; The critical values are -3.159, -3.466 and -4.075 for the 10%, 5% and 1% significance level, respectively; The figures in the parentheses are the chosen lag lengths in the ADF regression.…”

Section: (3) 115-125 2018mentioning

confidence: 99%

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Price convergence in the UK supermarket chains: Evidence from nonlinear cointegration approach

Woo

Lee

2018

Econ Bus Lett

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Supermarket chain is an important sector of the UK grocery stores and the growing dominance of supermarket chains has brought public concern over exploitation of market power in the UK retail grocery industry. This paper therefore aims to examine the price convergence of the UK supermarket products. Since the cointegrating relationship between supermarket prices may not be exact or linear, we adopt the rank tests for analysis which do not require prior knowledge and specification of the linear or nonlinear functional form. Our results confirm the evidence of the price convergence of all grocery products and then validate the price competition between the UK supermarket chains. Furthermore, a subset of the cointegration relationships exhibits nonlinear long-run price co-movements.

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Section: (3) 115-125 2018mentioning

confidence: 99%

“…Research studies have adopted cointegration analysis for delineation of the relevant market. Evidence of product price cointegration reveals the existence of long-run price convergence and competition in the same relevant market (Woo et al, 2017). Otherwise, the products are sold in separate markets.…”

Section: Introductionmentioning

confidence: 99%