DETERMINANTS OF STORE-LEVEL PRICE ELASTICITY

Using weekly scanner data representing 18 product categories, the auth ors estimated store-specific price elasticities for a chain of 83 supe rmarkets. They related these price sensitivities to a comprehensive se t of demographic and competitor variables that described the trading a reas of each of the stores. Despite the inability of previous research to find much of a relationship between consumer characteristics and p rice sensitivity, 11 demographic and competitive variables explain on average 67% of the variation in price response. Moreover, the authors found that the consumer demographic variables are much more influentia l than competitive variables. Their findings open the possibility for more effective everyday and promotional pricing strategies that exploi t store-level differences in price sensitivity.