Analysis of grocery buying and selling practices among manufacturers and distributors: Implications for industry structure and performance

Current buying and selling practices among grocery manufacturers and distributors reduce the efficiency of the food distribution system. This article applies the concept of positive feedback to explain the evolution of the system to its current situation. The study also uses concepts from game theory and transaction-cost economics to explain the persistence of inefficient practices in spite of the potential benefits from alternative forms of transacting. Based on these theoretical concepts, current grocery industry initiatives, such as every day low pricing and efficient consumer response, aimed at creating a lower cost food distribution system, are analyzed. © 1995 John Wiley & Sons, Inc.