Multiproduct Firms' Pricing Behavior in the Italian Grocery Trade
This paper investigates the determinants of price dispersion between staple and non-staple goods in grocery retailing, as the result of pricing decisions of multiproduct firms. Contradictory theoretical predictions about the nature of supermarkets' pricing behaviour are compared by highlighting the main underlying behavioural assumptions. These theoretical predictions are tested empirically using disaggregated data from the Italian grocery trade. The emprirical results provide evidence for the existence, in all types of retail organisation, of the form of price discrimination suggested in Bliss (1984). The results are consistent with discrimination due to the exploitation of consumers' switching costs.
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