RETAILERS PRICE BEHAVIOUR IN THE UK FRESH FRUIT AND VEGETABLE MARKET

The purpose of this paper is to study the price behaviour of fresh produce at the retail level of two leading supermarkets, Tesco and Sainsbury, with the purpose of gaining knowledge about their interaction. We focus the study on six products from the fresh fruits and vegetable group (i.e., tomatoes, Bramley’s apples, white cabbage, cucumbers, Iceberg lettuce and Round lettuce) due to the fact on the one hand it is a less complex supply chain (e.g., perishable product, less number of intermediaries) and on the other hand, because during the last 20 years the group has significantly evolved with supermarkets becoming the major players in the chain. The empirical methodology consisted of using Granger causality tests to establish the relationship between the series (e.g., leader-follower) and then vector autoregressive (VAR) models and variance decomposition procedures to capture the interaction of supermarket prices by product. Overall results indicate that the competition behaviour amongst the two retailers changes by product and evolve over time