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Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping

Author

Listed:
  • Richard Friberg
  • Frode Steen
  • Simen A. Ulsaker

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 2012–2016. The sensitivity of demand to the 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.

Suggested Citation

  • Richard Friberg & Frode Steen & Simen A. Ulsaker, 2022. "Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 408-438, May.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:2:p:408-38
    DOI: 10.1257/mic.20190302
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    Cited by:

    1. 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.
    2. Frédéric Kluser, 2025. "Cross-border shopping: evidence from household transaction records," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 161(1), pages 1-19, December.
    3. Agrawal, David R. & Bagh, Adib & Mardan, Mohammed, 2025. "Sensitivity versus size: implications for tax competition," Theoretical Economics, Econometric Society, vol. 20(3), July.
    4. Burstein, Ariel & Lein, Sarah & Vogel, Jonathan, 2024. "Cross-border shopping: Evidence and welfare implications for Switzerland," Journal of International Economics, Elsevier, vol. 152(C).
    5. Frederic Kluser, 2024. "Cross-Border Shopping: Evidence from Household Transaction Records," Diskussionsschriften credresearchpaper42, Universitaet Bern, Departement Volkswirtschaft - CRED.
    6. 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.
    7. 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.
    8. 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).

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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