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Multiproduct retailers and the sale phenomenon

Author

Listed:
  • Daniel Hosken

    (Federal Trade Commission, 600 Pennsylvania Ave., NW, Washington, D.C., 20580)

  • David Reiffen

    (Federal Trade Commission, 600 Pennsylvania Ave., NW, Washington, D.C., 20580)

Abstract

Two common features of retailing are that each retailer sells many different products, and that pricing strategies differ across products. This paper extends previous work on single-product retailer competition to a multiproduct setting. Specifically, we derive equilibrium pricing strategies for perishable and nonperishable goods. We find the intuition used to explain pricing dynamics for nonperishable items in single-product models generalizes to the multiproduct setting. Moreover, because goods are substitute means of attracting customers within the multiproduct setting, price changes for the nonperishable good will affect the perishable good price. In addition, the multiproduct setting generates a rich set of implications, some of which we empirically examine. For example, we find that, consistent with the theory, perishable and nonperishable price changes are negatively correlated. This and other evidence suggests that pricing dynamics are related in predictable ways to product characteristics, such as consumers' storage costs. [JEL Numbers: L81, L11, D21]. © 2001 John Wiley & Sons, Inc.

Suggested Citation

  • Daniel Hosken & David Reiffen, 2001. "Multiproduct retailers and the sale phenomenon," Agribusiness, John Wiley & Sons, Ltd., vol. 17(1), pages 115-137.
    • Handle: RePEc:wly:agribz:v:17:y:2001:i:1:p:115-137
    DOI: 10.1002/1520-6297(200124)17:1<115::AID-AGR1006>3.0.CO;2-H
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    References listed on IDEAS

    as
    1. Joel Sobel, 1984. "The Timing of Sales," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 353-368.
    2. J. Miguel Villas‐Boas, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, March.
    3. Banks, Jeffrey & Moorthy, Sridhar, 1999. "A model of price promotions with consumer search," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 371-398, April.
    4. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-370, July.
    5. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
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    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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