Multiproduct Retailing and Consumer Shopping Behavior: The Role of Shopping Costs
Copyright policy )Multiproduct Retailing and Consumer Shopping Behavior: The Role of Shopping Costs
We empirically examine the role of shopping costs in consumer shopping behavior in a context of competing differentiated supermarkets that supply similar product lines. We develop and estimate a model of demand in which consumers can purchase multiple products from multiple stores in the same week, and incur transaction costs of dealing with supermarkets. We show that a similar model without shopping costs predicts a larger proportion of multistop shoppers and overestimates own-price elasticities and product markups. Further, we use our model along with a model of competition between supermarkets to study two practices that are commonly used by supermarkets: product delisting and loss-leader pricing. We show that the presence of shopping costs makes product delisting less profitable whereas it makes loss-leader pricing more profitable compared to a context in which consumers do not incur shopping costs.
product delisting, Multistop shopping, 330, Similar models, Loss-leader pricing, Transaction cost, 338, Retail stores, 650, shopping costs, Multiple products, Consumer shopping, Market power, loss-leader pricing, Economie industrielle, Cost benefit analysis, Shopping costs, Profitability, JEL: L - Industrial Organization/L.L1 - Market Structure, Own-price elasticities, [QFIN]Quantitative Finance [q-fin], multistop shopping, market power, D.D1.D12, Supermarket competition, Product delisting, L.L8.L81, Consumer behavior, [QFIN] Quantitative Finance [q-fin], Firm Strategy, Costs, JEL: D - Microeconomics/D.D1 - Household Behavior and Family Economics/D.D1.D12 - Consumer Economics: Empirical Analysis, L.L1.L13, Market Power, JEL: L - Industrial Organization/L.L8 - Industry Studies: Services/L.L8.L81 - Retail and Wholesale Trade • e-Commerce, and Market Performance/L.L1.L13 - Oligopoly and Other Imperfect Markets
product delisting, Multistop shopping, 330, Similar models, Loss-leader pricing, Transaction cost, 338, Retail stores, 650, shopping costs, Multiple products, Consumer shopping, Market power, loss-leader pricing, Economie industrielle, Cost benefit analysis, Shopping costs, Profitability, JEL: L - Industrial Organization/L.L1 - Market Structure, Own-price elasticities, [QFIN]Quantitative Finance [q-fin], multistop shopping, market power, D.D1.D12, Supermarket competition, Product delisting, L.L8.L81, Consumer behavior, [QFIN] Quantitative Finance [q-fin], Firm Strategy, Costs, JEL: D - Microeconomics/D.D1 - Household Behavior and Family Economics/D.D1.D12 - Consumer Economics: Empirical Analysis, L.L1.L13, Market Power, JEL: L - Industrial Organization/L.L8 - Industry Studies: Services/L.L8.L81 - Retail and Wholesale Trade • e-Commerce, and Market Performance/L.L1.L13 - Oligopoly and Other Imperfect Markets
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