Supermarket Promotions and Food Prices

Using a sample comprising nearly a quarter of a million weekly prices from the largest seven supermarket chains in the UK, we present statistical evidence on two pricing practices that have attracted public interest. Analysing price dynamics before and after periods of promotional discounting the investigation finds first, no evidence of a general tendency for sales to disguise rises in the regular price, and second, some evidence for prices to rise prior to sales in a manner that is consistent with the exaggeration of the discount. As such, the results parallel the competition authority’s view of supermarkets use of promotions and also point to the useful contribution that retail price microdata might play in keeping prices in check.