Chain-store pricing for strategic accommodation
Dobson, Paul, 1962- and Waterson, Michael, 1950- (2003) Chain-store pricing for strategic accommodation. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers).
WRAP_Dobson_twerp677.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Chain-stores now dominate most areas of retailing. While retailers may operate nationally or even internationally, the markets they compete in are largely local. How should they best operate pricing policy in respect of the different markets served - price uniformly across the local markets or on a local basis according to market conditions? We model this by allowing local market differences, with entry being inevitable in certain markets while being naturally or institutionally blockaded in others. We show that practising price discrimination is not always best for the chain-store. Competitive conditions exist under which uniform pricing can raise profits.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HF Commerce|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Chain stores, Commerce, Price discrimination, Price management, Pricing|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Number of Pages:||22|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|References:||Armstrong, M. and Vickers, J. (2001), “Competitive Price Discrimination”, RAND Journal of Economics, Vol. 32(4), pp. 579-605. Besanko, D. and Lyon, T.P. (1993), “Equilibrium Incentives for Most-Favoured Customer Clauses in an Oligopolistic Industry”, International Journal of Industrial Organization, Vol. 11(3), pp. 347-367. Bresnahan, T.F. and Reiss, P. (1987), “Do entry conditions differ across markets?” Brookings Papers on Economic Activity, 1977:3, pp. 833-81. Chen, Y.X., Narasimhan, C. and Zhang, Z.J. (2001), “Consumer heterogeneity and competitive price-matching guarantees”, Marketing Science, Vol. 20(3), pp. 300-314. Competition Commission (2000), Supermarkets: A report on the supply of groceries from multiple stores in the United Kingdom, Cm 4842, TSO: London. Cooper, T.E. (1986), “Most-Favored-Customer Pricing and Tacit Collusion”, RAND Journal of Economics, Vol. 17, pp. 377-388. Corts, K.S. (1997), “On the competitive effects of price-matching policies”, International Journal of Industrial Organization, Vol. 15(3), pp. 283-299. Corts, K.S. (1998), “Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment”, RAND Journal of Economics, Vol. 29, pp. 306-323. Dalkir, S. and Warren-Boulton, F.R. (1999), “Prices, Market Definition, and the Effects of Merger: Staples-Office Depot (1997)”, in J.E. Kwoka and L. White (eds.), The Antirust Revolution: Economics, Competition and Policy, 3rd Edition, Oxford University Press: Oxford. DeGraba, P.J. (1987), “The effects of price restrictions on competition between national and local firms”, RAND Journal of Economics, Vol. 18(3), pp. 333-347. Holmes, T.J. (1989), “The Effects of Third-Degree Price Discrimination in Oligopoly”, American Economic Review, Vol. 79, pp. 244-250. Hviid, M. and Shaffer, G. (1999), “Hassle costs: the Achilles’ heel of price-matching guarantees”, Journal of Economics and Management Strategy, Vol. 8(4), pp. 489-521. Kreps, D.M. and Wilson, R. (1982), “Reputation and imperfect information”, Journal of Economic Theory, Vol. 27(2), pp. 233-79. Levy, D., Bergen, M., Dutta, S. and Venable, R. (1997), “The magnitude of menu costs: direct evidence from large US supermarket chains”, Quarterly Journal of Economics, Vol. 112, pp. 791-825. Logan, J.W. and Lutter, R.W. (1989), “Guaranteed lowest prices: Do they facilitate collusion?” Economics Letters, Vol. 31, pp. 189-192. Milgrom, P. and Roberts J. (1982), “Predation, reputation, and entry deterrence”, Journal of Economic Theory, Vol. 27(2), pp. 280-312. MMC (1997a), Domestic Electrical Goods I: a report on the supply in the UK of television, video cassette recorders, hi-fi systems and camcorders, Monopolies and Mergers Commission, Cm 3675, TSO: London. MMC (1997b), Domestic Electrical Goods II: a report on the supply in the UK of washing machines, tumble dryers, dishwashers and cold food storage equipment, Monopolies and Mergers Commission, Cm 3676, TSO: London. Salop, S. (1986), “Practices that (credibly) facilitate oligopoly coordination”, in J. Stiglitz and G. Mathewson (eds), New Development in the Analysis of Market Structure, MIT Press: Cambridge, MA. Salop, S.C. and Scheffman, D.T. (1983), “Raising Rivals’ Costs”, American Economic Review, Papers and Proceedings, Vol. 73, pp. 267-71. Selten, R. (1978), “The Chain Store Paradox”, Theory and Decision, Vol. 9, pp. 127-59. Winter, R.A. (1997), “Colluding on relative prices”, RAND Journal of Economics, Vol. 28(2), pp. 359-371.|
Actions (login required)