The Sweezy model of price competition among private labels of chain stores

Abstract

The aim of the paper is to verify and explain the actual effects of the Sweezy oligopoly model and its eventual impact on the consumer demand and the structure of the food supply of chain stores. The methodology of the paper is based on a comparative analysis of the structure of commodities of chain stores in the Czech Republic in terms of consumer demand and its change over time. An example of this model behaviour of firms may be the competition between two supermarket chains Billa and Kaufland in the market with private label products (e.g. pork meat). Results of the analysis of the Sweezy model imply that the change in company costs due to higher prices of inputs does not affect product prices and this is the reason behind the rigidity of prices in the oligopolistic markets in the Sweezy model.