Price Points and Thresholds in Retail Food Demand: Testing Methods and Procedures

Price Points and Thresholds in Retail Food Demand: Testing Methods and Procedures

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Retailers are constantly forced to make strategicdecisions regarding the frequency and magnitude ofprice and quantity discounts. Demand studies haveestablished that consumer response to food retailprice and quantity discounts produce demandirregularities. Traditional demand analysis failed toaccount for demand irregularities and often result inspecification bias. In a theoretical framework,demand irregularities can be explained using theconcept of price points and price thresholds.Presence/absence of price points and price thresholdsdirectly impact the profitability of the retailers.The primary contribution of this work is thedevelopment of a feasible method by which pricepoints can be rigorously identified and incorporatedinto demand systems. Methods and findings of thisstudy are useful to both private and public sectordemand policy analysts.