Pricing and power: Puzzles from the retail food market
Murillo, Jose Antonio
Doctor of Philosophy
This work documents and analyzes three pricing practices that are common to the retail food industry: quantity surcharges, downward price rigidity and nine-ending pricing. Quantity surcharges happen when food retailers assign higher unit prices to larger packages. Downward price rigidity means that the retailers' response to wholesale decrements is less than proportional than to wholesale increments. Nine-ending pricing refers to the practice of setting the rightmost digit of a price at nine. The findings on the quantity surcharge practice reveal its usage is significant and persistent. The analysis indicates that food retailers may use this strategy to price discriminate among different types of consumers.