Examining the performance index of retail pricing strategies under different types of competition

Jung, Ilyoung; Park, Imsu; Choi, Jeong Hoon

doi:10.1504/ijrm.2018.096326

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2020

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“…A Hi–Lo policy on the other hand is characterized by steep temporary price discounts on inflated “regular” prices for many brands and categories and has been adopted by other supermarkets (e.g., Kroger and Safeway). An EDLP policy tends to draw price‐sensitive shoppers to purchase in larger baskets, whereas a Hi–Lo policy often attracts “cherry pickers” (Jung, Park, & Choi, 2018; Lal & Rao, 1997).…”

Section: Literature Reviewmentioning

confidence: 99%

Market competition and pricing strategies in retail supply chains

2020

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This study provides a better explanation for the continued prevalence of high–low (Hi–Lo) pricing strategy. We investigate the impact of market competition on adopting two different pricing strategies in the retail industry: everyday low price (EDLP) strategy and Hi–Lo strategy. We developed two analytic models using a game‐theoretic modeling approach: the profit maximization model and the sales revenue maximization model. We then conducted an econometric analysis based on retail store‐level dataset. The result shows that an EDLP player's equilibrium price depends highly on the cost level rather than competitor's price whereas the Hi–Lo player's equilibrium price depends mainly on the range of promotional basket as well as the cost level.

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Section: Literature Reviewmentioning

confidence: 99%