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Chain-Store Pricing For Strategic Accommodation

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Author Info

  • Dobson, Paul W

    (Loughborough University)

  • Waterson, Michael

    (University of Warwick)

Abstract

Chain-stores now dominate most areas of retailing. While retailers may operate nationally or even internationally, the markets they compete in are largely local. How should they best operate pricing policy in respect of the different markets served - price uniformly across the local markets or on a local basis according to market conditions? We model this by allowing local market differences, with entry being inevitable in certain markets while being naturally or institutionally blockaded in others. We show that practising price discrimination is not always best for the chain-store. Competitive conditions exist under which uniform pricing can raise profits.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp677.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 677.

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Length: 22 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:wrk:warwec:677

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Related research

Keywords: Chain-store ; Pricing Policy ; Price Discrimination ; Local Markets;

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References

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  1. Corts, Kenneth S., 1997. "On the competitive effects of price-matching policies," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 15(3), pages 283-299, May.
  2. Morten Hviid & Greg Shaffer, 1999. "Hassle Costs: The Achilles' Heel of Price-Matching Guarantees," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 8(4), pages 489-521, December.
  3. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 244-50, March.
  4. Besanko, David & Lyon, Thomas P., 1993. "Equilibrium incentives for most-favored customer clauses in an oligopolistic industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 11(3), pages 347-367, September.
  5. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, Elsevier, vol. 27(2), pages 253-279, August.
  6. Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 2005. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," Macroeconomics, EconWPA 0505012, EconWPA.
  7. Logan, John W. & Lutter, Randall W., 1989. "Guaranteed lowest prices: do they facilitate collusion?," Economics Letters, Elsevier, Elsevier, vol. 31(2), pages 189-192, December.
  8. Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Consumer Heterogeneity and Competitive Price-Matching Guarantees," Marketing Science, INFORMS, INFORMS, vol. 20(3), pages 300-314, June.
  9. Paul Milgrom & John Roberts, 1997. "Predation, reputation , and entry deterrence," Levine's Working Paper Archive 1460, David K. Levine.
  10. Thomas E. Cooper, 1986. "Most-Favored-Customer Pricing and Tacit Collusion," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 377-388, Autumn.
  11. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
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