This study aims to measure and compare the efficiency of two
pricing strategies of retail chains, a Hi-Lo pricing strategy and an everyday
low price (EDLP) strategy, according to different types of competition.
This research suggests the speed of price adjustment approach to measure the
efficiency of retail chains, and the nonlinear seemingly unrelated regression
estimation captures the impacts of market competition. The findings suggest
that, in highly competitive markets, the Hi-Lo chains show a greater speed of
price adjustment, whereas a slower speed is shown in less concentrated
markets. In particular, the Hi-Lo chains in the market leader position with the
EDLP followers show that the speed of price adjustment is slower than in other
markets. When Hi-Lo chains compete with each other in the same market, they
offer price discounts more aggressively and adjust the price rapidly as a means
to maintain their market position.
