Retail Market Power in a Shopping Basket Model of Supermarket Competition

Timothy Richards (), Stephen Hamilton and Koichi Yonezawa
Additional contact information
Timothy Richards: Arizona State University
Koichi Yonezawa: Technical University of Munich

No 1503, Working Papers from California Polytechnic State University, Department of Economics

Abstract: Supermarket consumers typically purchase more than one item ata time. Modeling demand relationship among items in consumers' shopping baskets is therfore essential to understanding how retailers set prices. To date, models of price competition among retailers typically assume consumers make discrete choices among categories in the store or derive utility from independent goods that is unaffected by basket composition. In this paper, we develop a model of price competition among items in consumer shopping baskets. We derive inferences for market power under complementary categories and compare outcomes with the prediction of models that assume discrete choice among independent categories. We show that complementarity generates substantially greater pricing power for retailers than independent goods, resulting in less competitive behavior.

Pages: 43 pages
Date: 2015
New Economics Papers: this item is included in nep-com, nep-dcm and nep-mkt
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https://drive.google.com/file/d/17R1KpWpjIo-DUIFit ... /view?usp=drive_link First version, 2015 (application/pdf)

Related works:
Journal Article: Retail Market Power in a Shopping Basket Model of Supermarket Competition (2018)
Working Paper: Retail Market Power in a Shopping Basket Model of Supermarket Competition (2017)
Working Paper: Retail Market Power in a Shopping Basket Model of Supermarket Competition (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cpl:wpaper:1503

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