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The Setting of Retail Prices in a Customer Market

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  • McDonald, Ian M

Abstract

This paper extends the theory of the determination of retail prices in a customer market to a shop selling many types of goods. For a multigood shop, a discontinuous marginal revenue function for each good sold is derived. Under reasonable assumptions, the size of this discontinuity depends only on the customer dynamics and is independent of own-price elasticities and cross-price elasticities. A discussion of the determination of producer prices shows how the theory can explain the relative stability of retail prices. Copyright 1990 by The Economic Society of Australia.

Suggested Citation

  • McDonald, Ian M, 1990. "The Setting of Retail Prices in a Customer Market," The Economic Record, The Economic Society of Australia, vol. 66(195), pages 322-328, December.
  • Handle: RePEc:bla:ecorec:v:66:y:1990:i:195:p:322-28
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    Cited by:

    1. Sibly, Hugh, 2001. "Price Inflexibility in Markets with Repeat Purchasing," Journal of Macroeconomics, Elsevier, vol. 23(3), pages 459-475, July.
    2. Ali Choudhary & Thorlakur Karlsson & Gylfi Zoega, 2009. "Survey Evidence on Customer Markets," Birkbeck Working Papers in Economics and Finance 0916, Birkbeck, Department of Economics, Mathematics & Statistics.

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