In this paper an attempt has been made to determine the retailers’margin fixing behavior by relating weekly prices of fruit, vegetables and some basic food items in Shiraz. The results indicated that most variations in retail prices of these crops are due to their wholesale prices. Among the types of retail margin relationships considered, absolute type appeared to be more frequent than other types of margins. Allen and others have presented a theoretical framework for explaining the relation between retail margins and price elasticity of demand of various commodities. This explanation seems plausible for retail markets in developed countries, but it may be less appropriate for developing countries due to different conditions prevailing in their retail markel.
The results of this and other studies do not seem to be consistant with Allen’s explanation. In this paper some reasons and problems causing this inconsistancy are presented. Although the evidence from this analysis appears to contradict the Allen’s explanation, many problems will need to be over come if a study of this kind is to yield really meaningful results. First of all the problem will have to be studied in a more detailed way. Retail market should be classified according to consumers’ income and observation of price movement in the market should be made in a fairly detailed way.
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