The determinants of consumer price dispersion: Evidence from French supermarkets (with Patrick Sevest re and Jonathan Thebault)
Abstract:
We characterize the dispersion of grocery prices in France based on a lar
ge original data set of prices in more than 1500 supermarkets across the co
untry. On average across products, the 90th percentile of relative prices i
s 17% higher than the 10th. The mean absolute deviation from quarterly aver
age product prices is 5% on average in the French retail sector and the sta
ndard deviation of relative prices is 7%. We show that temporary sales and
promotions explain only little of the observed price dispersion, while the
permanent component of price dispersion largely dominates. Indeed, in Franc
e price dispersion across stores essentially results from persistent hetero
geneity in retail chains’ national pricing. Consumer prices are largely det
ermined at a national level by retail groups’ bargaining power with produce
rs and retail chains’ positioning. We also show, however, that local condit
ions regarding demand or local competition between supermarkets do explain
observed prices on local markets, though to a much lower extent.