Price Dispersion in the Grocery Market

The proverbial “law of one price” is virtually never empirically valid. Homogeneous goods are often sold at widely different prices by rival firms, even in environments that seem particularly conducive to economic competition. And prices for the same goods often vary over time. The grocery market seems to be one of the prime examples of price dispersion in which there exists price uncertainty. As Blattberg and Neslin (1990, 344) have argued, “promotions are a way of life for retailers. Every week when the consumer goes to the grocery store, there are as many as 100 items on sale.” We often observe price variations across stores, over time for a certain brand, and across brands within a category in a store. But surprisingly, price dispersion in the grocery market, for the most part, has not been