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Multi-category competition and market power: a model of supermarket pricing

Thomassen, Øyvind, Smith, Howard, Seiler, Stephan and Schiraldi, Pasquale (2017) Multi-category competition and market power: a model of supermarket pricing. American Economic Review, 107 (8). pp. 2308-2351. ISSN 0002-8282

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Abstract

In many competitive settings consumers buy multiple product categories, and some prefer to use a single firm, generating complementary cross-category price effects. To study pricing in supermarkets, an organizational form where these effects are internalized, we develop a multi-category multi-seller demand model and estimate it using UK consumer data. This class of model is used widely in theoretical analysis of retail pricing. We quantify crosscategory pricing effects and find that internalizing them substantially reduces market power. We find that consumers inclined to one-stop (rather than multi-stop) shopping have a greater pro-competitive impact because they generate relatively large cross-category effects

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aer
Additional Information: © 2017 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HF Commerce
JEL classification: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
L - Industrial Organization > L8 - Industry Studies: Services > L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Sets: Departments > Economics
Date Deposited: 16 Mar 2017 17:25
Last Modified: 20 Oct 2019 02:45
URI: http://eprints.lse.ac.uk/id/eprint/69855

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