MAS 2011 Proceeding

How important is price leadership in the UK fresh fruit and vegetable market?

Authors:   Cesar Revoredo-Giha, Alan Renwick


The purpose of this paper is to analyse whether price leadership is present in the market for selected fresh fruits and vegetable and whether it plays any role in the pricing decisions of two major retailers in the UK Tesco and Sainsbury?s. This is done using weekly price data for six products sold in the supermarkets. The empirical methodology used in the paper consisted of three consecutive steps first, a statistical analysis of the properties of the prices; second, a causality analysis of the series using Granger causality tests with the purpose of investigating the existence of price leadership; third, modelling the interrelationships of both supermarket prices by means of vector autoregressive models (VARs) for each product and simulating the retailers? interaction using impulse-response functions. Except in the case of tomatoes, where Tesco appears as the leader since 2001, the other results are mixed, probably reflecting the changes in the marketing of fruit and vegetables market during the period of study.

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