IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11344.html

Why Do Prices Differ Across Stores? Differential Competition Environments and Their Price Impacts

Author

Listed:
  • Gordon Jochem Klein
  • Ralph Bernd Siebert
  • Ralph Siebert

Abstract

Our study provides empirical insights into the extent to which differential market demographics and differential competition environments affect product prices. Using big data, we find that price variations are caused mainly by differential competitive environments. More specifically, we find that Brand Competition Within Stores exerts the largest downward pressure on prices. A 10 percent increase in the number of brands reduces prices by about 10 percent. Product Competition Within Stores exerts the second-largest price effect, followed by Store Competition Within Local Markets. Moreover, retailers operating multiple stores in a local market coordinate prices to attenuate competitive downward pressure on prices.

Suggested Citation

  • Gordon Jochem Klein & Ralph Bernd Siebert & Ralph Siebert, 2024. "Why Do Prices Differ Across Stores? Differential Competition Environments and Their Price Impacts," CESifo Working Paper Series 11344, CESifo.
    • Handle: RePEc:ces:ceswps:_11344
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, June.
    2. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1351-1408.
    3. William J. Baumol, 1967. "Calculation of Optimal Product and Retailer Characteristics: The Abstract Product Approach," Journal of Political Economy, University of Chicago Press, vol. 75(5), pages 674-674.
    4. Michaela Draganska & Michael Mazzeo & Katja Seim, 2009. "Beyond plain vanilla: Modeling joint product assortment and pricing decisions," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 105-146, June.
    5. Pinelopi Koujianou Goldberg & Frank Verboven, 2001. "The Evolution of Price Dispersion in the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 811-848.
    6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    7. Judith A. Chevalier & Anil K. Kashyap, 2019. "Best Prices: Price Discrimination and Consumer Substitution," American Economic Journal: Economic Policy, American Economic Association, vol. 11(1), pages 126-159, February.
    8. Johannes Stroebel & Joseph Vavra, 2019. "House Prices, Local Demand, and Retail Prices," Journal of Political Economy, University of Chicago Press, vol. 127(3), pages 1391-1436.
    9. Celine Bonnet & Zohra Bouamra-Mechemache & Gordon J Klein, 2022. "National brands in hard discounters: market expansion and bargaining power effects," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(5), pages 1113-1145.
    10. Sungjin Cho & John Rust, 2010. "The Flat Rental Puzzle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 560-594.
    11. Dubois, Pierre & Perrone, Helena, 2015. "Price Dispersion and Informational Frictions: Evidence from Supermarket Purchases," TSE Working Papers 15-606, Toulouse School of Economics (TSE), revised Sep 2017.
    12. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2013. "Does Management Matter? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 1-51.
    13. Ben Shiller & Joel Waldfogel, 2011. "Music for a Song: An Empirical Look at Uniform Pricing and Its Alternatives," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 630-660, December.
    14. Matthew Grennan, 2013. "Price Discrimination and Bargaining: Empirical Evidence from Medical Devices," American Economic Review, American Economic Association, vol. 103(1), pages 145-177, February.
    15. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
    16. Benaissa Chidmi & Rigoberto A. Lopez, 2007. "Brand-Supermarket Demand for Breakfast Cereals and Retail Competition," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 324-337.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Germán Reyes, 2024. "Coarse Wage-Setting and Behavioral Firms," CRC TR 224 Discussion Paper Series crctr224_2024_492, University of Bonn and University of Mannheim, Germany.
    2. Germ'an Reyes, 2022. "Coarse Wage-Setting and Behavioral Firms," Papers 2206.01114, arXiv.org, revised Mar 2024.
    3. Heidhues, Paul & Köszegi, Botond, 2018. "Behavioral Industrial Organization," CEPR Discussion Papers 12988, C.E.P.R. Discussion Papers.
    4. Eugenio J. Miravete & Katja Seim & Jeff Thurk, 2020. "One Markup to Rule Them All: Taxation by Liquor Pricing Regulation," American Economic Journal: Microeconomics, American Economic Association, vol. 12(1), pages 1-41, February.
    5. Stefano DellaVigna & Matthew Gentzkow, 2019. "Uniform Pricing in U.S. Retail Chains," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 2011-2084.
    6. repec:cep:stieop:49 is not listed on IDEAS
    7. Laura Alfaro & Nick Bloom & Paola Conconi & Harald Fadinger & Patrick Legros & Andrew F Newman & Raffaella Sadun & John Van Reenen, 2024. "Come Together: Firm Boundaries and Delegation," Journal of the European Economic Association, European Economic Association, vol. 22(1), pages 34-72.
    8. Oriana Bandiera & Renata Lemos & Andrea Prat & Raffaella Sadun, 2018. "Managing the Family Firm: Evidence from CEOs at Work," The Review of Financial Studies, Society for Financial Studies, vol. 31(5), pages 1605-1653.
    9. Martin Nordin & Sören Höjgård, 2017. "An evaluation of extension services in Sweden," Agricultural Economics, International Association of Agricultural Economists, vol. 48(1), pages 51-60, January.
    10. Hazhir Rahmandad & Nelson Repenning, 2016. "Capability erosion dynamics," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 649-672, April.
    11. Bassi, Vittorio & Nyshadham, Anant & Tamayo, Jorge & Adhvaryu, Achyuta, 2020. "No Line Left Behind: Assortative Matching Inside the Firm," CEPR Discussion Papers 14554, C.E.P.R. Discussion Papers.
    12. Kambayashi, Ryo & Ohyama, Atsushi & Hori, Nobuko, 2021. "Management practices and productivity in Japan: Evidence from six industries in JP MOPS," Journal of the Japanese and International Economies, Elsevier, vol. 61(C).
    13. Axel Demenet, 2016. "Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries?," Working Papers DT/2016/12, DIAL (Développement, Institutions et Mondialisation).
    14. Felix Montag, 2023. "Mergers, Foreign Competition, and Jobs: Evidence from the U.S. Appliance Industry," Rationality and Competition Discussion Paper Series 378, CRC TRR 190 Rationality and Competition.
    15. Axel Demenet & Quynh Hoang, 2018. "How important are management practices for the productivity of small and medium enterprises?," WIDER Working Paper Series 69, World Institute for Development Economic Research (UNU-WIDER).
    16. Natalie Chun & Soohyung Lee, 2015. "Bonus compensation and productivity: evidence from Indian manufacturing plant-level data," Journal of Productivity Analysis, Springer, vol. 43(1), pages 47-58, February.
    17. Banerjee, Abhijit V. & Chiplunkar, Gaurav, 2024. "How important are matching frictions in the labor market? Experimental & non-experimental evidence from a large Indian firm," Journal of Development Economics, Elsevier, vol. 171(C).
    18. Martin, R. & de Haas, Ralph & Muuls, Mirabelle & Schweiger, Helena, 2021. "Managerial and Financial Barriers to the Net-Zero Transition," Other publications TiSEM f0572d8a-40d7-458f-bb43-8, Tilburg University, School of Economics and Management.
    19. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2011. "Management Practices Across Firms and Countries," CEP Discussion Papers dp1109, Centre for Economic Performance, LSE.
    20. Christopher Cornwell & Ian M. Schmutte & Daniela Scur, 2021. "Building a Productive Workforce: The Role of Structured Management Practices," Management Science, INFORMS, vol. 67(12), pages 7308-7321, December.
    21. Michael Peters & Ufuk Akcigit, 2014. "Lack of Selection and Poor Management Practices: Firm Dynamics in Developing Countries," 2014 Meeting Papers 762, Society for Economic Dynamics.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_11344. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.