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Hump-shaped cross-price effects and the extensive margin in cross-border shopping

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  • Steen, Frode

Abstract

This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store×category sales data from Norway’s largest grocery chain 2011-2016. The sensitivity of demand to foreign price is hump-shaped and greatest 30-60 minutes’ driving distance from the closest foreign store. Combining continuous demand, fixed costs of cross-border shopping and linear transport costs `a la Hotelling we show how this hump-shape can arise through a combination of intensive and extensive margins of cross-border shopping. Our conclusions are further supported by novel survey evidence and cross-border traffic data.

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  • Steen, Frode, 2019. "Hump-shaped cross-price effects and the extensive margin in cross-border shopping," CEPR Discussion Papers 13650, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13650
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    Cited by:

    1. Friberg, Richard & Halseth, Emil M. Strøm & Frode, Steen & Ulsaker, Simen A., 2022. "The effect of cross-border shopping on commodity tax revenue: Results from a natural experiment," Discussion Paper Series in Economics 9/2022, Norwegian School of Economics, Department of Economics.
    2. Odran Bonnet & Étienne Fize & Tristan Loisel & Lionel Wilner, 2024. "Is Carbon Tax Truly More Salient? Evidence from Fuel Tourism at the France-Germany Border," CESifo Working Paper Series 10918, CESifo.
    3. Fr d ric Kluser, 2023. "Cross-Border Shopping: Evidence from Household Transaction Records," Diskussionsschriften credresearchpaper42, Universitaet Bern, Departement Volkswirtschaft - CRED.
    4. Evensen, Charlotte B. & Steen, Frode & Ulsaker, Simen A., 2021. "Co-location, good, bad or both: How does new entry of discount variety store affect local grocery business?," Discussion Paper Series in Economics 17/2021, Norwegian School of Economics, Department of Economics.
    5. Huynh, Dat & Sokolova, Anna & Tosun, Mehmet S., 2022. "Tax Elasticity of Border Sales: A Meta-Analysis," IZA Discussion Papers 15525, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Cross-border shopping; Competition in grocery markets; Product differentiation;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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