Using Price Rigidities to Explain Pricing Strategies in the Organic Milk Chain

Abstract

The stickiness of prices and reasons for price changes are widely discussed in market analyses and marketing theory. Explanations and reasons of rigidities have shown that prices do not change as often in small retail stores and in markets with high concentration (Powers and Powers 2001, Hannan and Berger 1991). For organic products, until now there have been few clear results about pricing strategies and it can be assumed that consumers pay premium prices for organic products with increasing market shares of the sector. Hence the opportunities regarding pricing behaviour and pricing strategies in the organic milk supply chain up to now have not been discussed. This paper strives to close this research gap by examining rigidities in the organic milk market on the basis of organic retail scanner data. Using these results, pricing strategies in the organic retail sector are discussed.