Demand Externalities from Co-Location
AbstractWe illustrate an approach to measure demand externalities from co-location by estimating household level changes in grocery spending at a supermarket among households that also buy gas at a co-located gas station, relative to those who do not. Controlling for observable and unobserved selection in the use of gas station, we find significant demand externalities; on average a household that buys gas has 7.7% to 9.3% increase in spending on groceries. Accounting for differences in gross margins, the profit from the grocery spillovers is 130% to 150% the profit from gasoline sales. The spillovers are moderated by store loyalty, with the gas station serving to cement the loyalty of store-loyal households. The grocery spillover effects are significant for traditional grocery products, but 23% larger for convenience stores. Thus co-location of a new category impacts both inter-format competition with respect to convenience stores (selling the new category) and intra-format competition with respect to other supermarkets (selling the existing categories).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1850.
Length: 35 pages
Date of creation: Feb 2012
Date of revision:
Contact details of provider:
Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
More information through EDIRC
Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-14 (All new papers)
- NEP-GEO-2012-03-14 (Economic Geography)
- NEP-MKT-2012-03-14 (Marketing)
- NEP-URE-2012-03-14 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gicheva, Dora & Hastings, Justine & Villas-Boas, Sofia B, 2008.
"Revisiting the Income Effect: Gasoline Prices and Grocery Purchases,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt7087m1p6, Department of Agricultural & Resource Economics, UC Berkeley.
- Dora Gicheva & Justine Hastings & Sofia Villas-Boas, 2007. "Revisiting the Income Effect: Gasoline Prices and Grocery Purchases," NBER Working Papers 13614, National Bureau of Economic Research, Inc.
- Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Glena Ames).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.