A rationale for repealing the 1987 Groceries Order
AbstractA ban on pricing below cost was implemented under the 1987 Groceries Order based on the premise that loss leading used in multi-product retail pricing distorts competition and exploits consumers in the short run, while driving a more concentrated structure and reducing welfare in the long run. Loss leading is examined for multi-product retailers selling in imperfectly competitive market niches with imperfect consumer information. We develop a theoretical argument in a simple two-stage framework that illustrates how loss leading on a subset of products is an equilibrium outcome of price competition that leaves overall welfare equal to that observed under laissez faire.
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Bibliographic InfoPaper provided by University College Dublin in its series Open Access publications from University College Dublin with number urn:hdl:10197/127.
Date of creation: 1999
Date of revision:
Publication status: Published in Economic and Social Review (1999) v.30, p.71-79
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Web page: http://www.ucd.ie
Grocery trade--Law and legislation; Price regulation--Ireland; Loss leaders--Ireland;
Other versions of this item:
- Patrick Paul Walsh & Ciara Whelan, 1999. "A Rationale for Repealing the 1987 Groceries Order," The Economic and Social Review, Economic and Social Studies, vol. 30(1), pages 71-90.
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STICERD - Economics of Industry Papers
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urn:hdl:10197/130, University College Dublin.
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