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The Setting of Retail Prices in a Customer Market

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  • IAN M. McDONALD

Abstract

This paper extends the theory of the determination of retail prices in a customer market to a shop selling many types of goods. For a multi‐good shop, a discontinuous marginal revenue function for each good sold is derived. Under reasonable assumptions the size of this discontinuity depends only on the customer dynamics and is independent of own‐price elasticities and cross‐price elasticities. A discussion of the determination of producer prices shows how the theory can explain the relative stability of retail prices.

Suggested Citation

  • IAN M. McDONALD, 1990. "The Setting of Retail Prices in a Customer Market," The Economic Record, The Economic Society of Australia, vol. 66(4), pages 322-328, December.
    • Handle: RePEc:bla:ecorec:v:66:y:1990:i:4:p:322-328
    DOI: 10.1111/j.1475-4932.1990.tb01737.x
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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-1061, October.
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    Cited by:

    1. Sibly, Hugh, 2001. "Price Inflexibility in Markets with Repeat Purchasing," Journal of Macroeconomics, Elsevier, vol. 23(3), pages 459-475, July.
    2. Ali Choudhary & Thorlakur Karlsson & Gylfi Zoega, 2009. "Survey Evidence on Customer Markets," Birkbeck Working Papers in Economics and Finance 0916, Birkbeck, Department of Economics, Mathematics & Statistics.
    3. Hugh Sibly, 1995. "Price Dynamics in Repeat‐Purchase Markets," The Economic Record, The Economic Society of Australia, vol. 71(2), pages 179-190, June.

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