Pricing Behavior of Multiproduct Retailers
This paper develops a model of competition among multiproduct retailers that is consistent with observed pricing regularities, such as the facts that virtually all products have large mass points in their price distributions and that most deviations fall below these mass points. The basis of the model is that, when consumers prefer to buy a bundle of goods from the same retailer, a given discount on any one good in the bundle will have a similar effect on consumers' likelihood of visiting that retailer. Consequently, discounts on goods sold by a retailer are substitute instruments for attracting customers, and factors that influence one goods' price will also affect other goods' prices. Hence, if intertemporal price changes are a means of price discriminating (as the literature suggests), then the impact of these changes will be reflected in the prices of many goods - including those for which discrimination is infeasible.
Volume (Year): 7 (2007)
Issue (Month): 1 (November)
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