TRANSFOP researchers present on-going research at a specially organised session at the AAEA in Washington, in early August (2013).

TRANSFOP researchers present on-going research in Zurich

TRANSFOP researchers presented on-going research at a specially organised session at the EAAE in Zurich, Switzerland, in early September (2011).

TRANSFOP Research Presented at an Organised EAAE Session in Zurich

The session was chaired by Stephan von Cramon (Göttingen) with Jo Swinnen (Leuven) providing an overview discussion of the presentations. Steve McCorriston (Exeter), the TRANSFOP coordinator gave an overview of the project to the general audience who attended the event. The principle motivation of the session was to (a) use the EAAE forum to highlight the overall aims and objectives of the project and (b) to present current research activities associated with food pricing issues which are the main focus of the project. All power-point presentations are available by clicking on the relevant links.

Jens Peter Loy (Kiel) and Christoph Weiss (Vienna) presented their work on sales and promotions in the food retailing sector. This research aims to extend previous theoretical work on sales and promotions focussing on both the breadth and depth of sales. As the presenters noted, promotional sales are a predominant feature of the marketing mix by food retailers with much of the price observations we observe being due to promotional sales. Their theoretical framework employed the idea of menu costs and ‘cherry picking’ where retailers can choose between the number of sales items and the level of discounts. Their model shows that a complementary relationship exists between these two choice variables which means that stores can compete by increasing the number of sales and the level of discounts. Their theoretical model was supported by some preliminary evidence relating to the behaviour of two German retailers. Download a copy of the presentation.

Wyn Morgan (Nottingham) presented joint research with Tim Lloyd (Nottingham), Andreea Halunga, James Davidson and Steve McCorriston (all Exeter) on estimating a model explaining food price inflation in the UK. Food price inflation (as with many other countries) has exceeded non-food price inflation over recent years (currently just in excess of 6% per annum) and, more generally, tends to be relatively volatile. An obvious cause for this is the recent rises in world agricultural commodity prices. The authors argue that while important, other factors such as exchange rates, labour costs and oil prices may matter too. Based on a vector error correction model, the main drivers of food price inflation in recent years has been world agricultural prices and exchange rates but they also show that the duration of the ‘spike’ on world markets is an important issue. Since world commodity price spikes tend to be short-lived rather than permanent events, the impact of commodity price changes on retail food prices will be highly dependent on the nature of the shock emanating from world markets. Download the full presentation.

Price transmission was the focus of the last two presentations. Celine Bonnet and Vincent Réquillart (both Toulouse) focussed on price transmission in the soft drink industry associated with sugar price reform in the EU. This issue is important from the perspective of thinking about reforms to price support and also to health policy. Typically, industrial organisation models tend to predict imperfect price transmission i.e. following a change in the upstream price, the change in the price of the good at the retail level is proportionately less. However, the innovation in the Bonnet and Requillart presentation was to account for the nature of interactions between stages in the food chain. Although economists often characterise the food chain as a chain of successively-related (typically imperfectly competitive) stages, seldom are the links that characterise the food chain accounted for. The authors show this is important for thinking about price transmission with, in their estimates associated with the sugar sector in France, indicating that the extent of price transmission is determined by non-linear pricing strategies that characterise the links between the food manufacturing and food retailing sectors. Download the full presentation by Celine Bonnet and Vincent Requillart.

In the final presentation, Chema Gil and Teresa Serra-Devesa (Barcelona) and Stephan von Cramon and Carsten Holst (Göttingen) provided an overview of recent econometric approaches to addressing price transmission. They specifically focus on asymmetric price transmission, which is associated with differing price transmission processes depending on whether the upstream price rises or falls. New developments and their potential relevance to asymmetric price transmission were covered with particular emphasis on time series techniques, although non-parametric methods were also addressed. They concluded by highlighting remaining challenges with particular emphasis on data issues. Download Chema Gil and Teresa Serra-Devesa's presentation.

Steve McCorriston

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