Retailers' strategies and food price dynamics: Evidence from dairy scanner data

We investigate the relationship between retailers' strategies and dairy price dynamics. Using high frequency Italian scanner data for different dairy products, we compute a weekly drift-free price index, specific for product category, chain, and type of store. Exploiting the (unbalanced) panel data structure to control for unobservable strategies by chain, time, and type of store, we test if unobservables are statistically significant in influencing the price dynamics of each of the products covered by our analysis. In general chain and type-of-store specific unobservables play a significant role. Moreover, we identify the role of some observable strategic variables in controlling or in stimulating price inflation rates. We obtain mixed results on the relationship between Private Label (PL) market shares and price trend, while we find price promotions to be more effective if applied to National Brands (NBs) rather than PLs. We conclude with some implications for the potential role of public policies in controlling food inflation.