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Hump-shaped cross-price effects and the extensive margin in cross-border shopping

Author

Listed:
  • Friberg, Richard

    () (Stockholm School of Economics)

  • Steen, Frode

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Ulsaker, Simen A.

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store×category sales data from Norway’s largest grocery chain 2011-2016. The sensitivity of demand to foreign price is hump-shaped and greatest 30-60 minutes’ driving distance from the closest foreign store. Combining continuous demand, fixed costs of cross-border shopping and linear transport costs `a la Hotelling we show how this hump-shape can arise through a combination of intensive and extensive margins of cross-border shopping. Our conclusions are further supported by novel survey evidence and cross-border traffic data.

Suggested Citation

  • Friberg, Richard & Steen, Frode & Ulsaker, Simen A., 2018. "Hump-shaped cross-price effects and the extensive margin in cross-border shopping," Discussion Paper Series in Economics 20/2019, Norwegian School of Economics, Department of Economics, revised 23 Sep 2019.
  • Handle: RePEc:hhs:nhheco:2019_020
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    References listed on IDEAS

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    More about this item

    Keywords

    Cross-border shopping; competition in grocery markets; product differentiation;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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