Multi-category competition and market power: a model of supermarket pricing.
- Author : Ø. Thomassen, H. Smith, S. Seiler, and P. Schiraldi
- Journal : American Economic Review / 107(8) 2308-2351, August 2017
- Link : https://www.aeaweb.org/articles?id=10.1257/aer.20160055
Abstract
In many competitive settings, consumers buy multiple product categories, and some prefer to use a single firm, generating complementary cross-category price effects. To study pricing in supermarkets, an organizational form where these effects are internalized, we develop a multi-category, multi-seller demand model and estimate it using UK consumer data. This class of model is used widely in theoretical analysis of retail pricing. We quantify cross-category pricing effects and find that internalizing them substantially reduces market power. We find that consumers inclined to one-stop (rather than multi-stop)