Price Warfare in Business Competition: A Study of Abnormal Competitive Behavior

By Ralph Cassady | Go to book overview

CHAPTER III
GENUINE PRICE WARFARE

We are now ready to examine the results of empirical analyses of price wars and related behavior patterns. Our first concern is with the nature of genuine price warfare, which is the subject of this chapter; after this we will consider near wars in the following chapter. For the purpose of this study, price wars will be classified as singleproduct and multi-product struggles.


SINGLE-PRODUCT WARS

Some price wars involve only a single product such as milk rather than several products, as for example, groceries. Usually in such situations, moreover, the product involved in the war is only one of several handled by the vendor, although it may be the most important one.

Bread. Bread is a product of universal use; hence there is a strong tendency to offer the commodity to consumers on a priceleader basis, although latterly this seems to be offset by the hesitation of foresighted vendors to cut the price of such a volatile item.1 Bread wars, which appear to have been fairly common at one time, now seem to occur rarely.2 It is said by some that this is due to the fact that bread companies exert strong pressure in the direction of maintaining resale prices. However, a price war involving the sale of bread did take place in Corvallis, Oregon, in the fall of 1950 and this has some interesting aspects from our point of view.3

The combatants in this engagement were two Corvallis independent grocers on one side and the local unit of a chain concern, Safeway Stores, on the other. It appears that independent grocers in Corvallis had for some time been offering bread at a price of 22¢ for the 1 1/2 lb. loaf, and Safeway regularly featured its privately-labeled loaf at 20¢. While no specific data are available relating to the prices of the other brands of bread carried by Safeway in this market, in the light of its general pricing policies at that time, it can be assumed that the company's prices were as low as those of the competitive vendors for comparable merchandise.

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