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- Title
Fanning the Flames? Flow Media Coverage of a Price War Affects Retailers, Consumers, and Investors.
- Authors
VAN HEERDE, HARALD J.; GIJSBRECHTS, ELS; PAUWELS, KOEN
- Abstract
This article explores how media coverage of a price war affects customer, retailer, and investor reactions over time. Using data covering a Dutch supermarket price war (2003-2005), the authors find that price reductions, especially deep reductions, trigger media coverage of the price conflict. This sets off a chain of reactions. Press messages have a significant effect on market share and abnormal stock returns, beyond retailers' own price and advertising. Importantly, this study uncovers striking asymmetries regarding the kind of coverage to which stakeholders react: whereas consumers only respond to the tone of pricerelated press coverage, retailers and investors only react to its quantity. Next, media coverage feeds back into the retailers' pricing actions: more media coverage triggers new price cuts in addition to those dictated by competitive reactions. As such, media coverage triggers a deeper spiral of price cuts, intensifying the competitive price battle. However, as the price war progresses, media coverage becomes less frequent and less favorable, which decelerates the downward price spiral.
- Subjects
NETHERLANDS; PRICE wars; MASS media &; economics; COMPETITION in the grocery industry; PRESS; SUPERMARKETS; RETAIL industry; PRICE cutting
- Publication
Journal of Marketing Research (JMR), 2015, Vol 52, Issue 5, p674
- ISSN
0022-2437
- Publication type
Article
- DOI
10.1509/jmr.13.0260