VARIABILITY OF BRAND PRICE ELASTICITIES ACROSS RETAIL STORES - ETHNIC, INCOME, AND BRAND DETERMINANTS

Retail pricing decisions are often made with respect to the price sens itivity of shoppers in a retail store or market area. This paper explo res how certain brand and consumer characteristics relate to the varia bility of brand price elasticities across stores belonging to the same chain. The authors measure the price sensitivity of 14 liquor brands sold in 35 store locations. Since the stores operate in a monopoly env ironment, the analysis is free from the confounds caused by competitiv e pricing or promotional activity that often hamper retail pricing stu dies. Also, the monopoly situation provides data that represent a cens us of brand sales in the categories studied Results of a two-stage eco nometric analysis show that brand price elasticity is higher for brand s that are promoted more frequently and for brands that have higher ma rket shares. The magnitude of brand price elasticity is also found to be directly related to the household income in a market area and inver sely related to the proportion of residents in a market area who are A frican-American.