Economics at your fingertips  

Unplanned Purchases and Retail Competition

Justin P. Johnson

American Economic Review, 2017, vol. 107, issue 3, 931-65

Abstract: I propose a framework in which asymmetric multiproduct retailers compete for one-stop shoppers who have biased beliefs about their future purchase probabilities (and so make unplanned purchases). One firm carries a full portfolio of products while the other carries an incomplete but endogenous one. Using this framework, I examine the phenomenon of loss leading, the optimal product portfolio of the smaller firm, and the effects of banning loss leading. Among other results, I show that there is a nonpredatory (and possibly procompetitive) justification for the observation that such larger firms may charge below cost on the core product lines of their smaller rivals.

JEL-codes: D11 D21 D83 L13 L25 L71 L81 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20140605
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf) ... Xmo4i3cWsSwdnNEsQab4 (application/pdf) ... C4MzjybEw99pVaks4utC (application/zip)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

Page updated 2018-06-23
Handle: RePEc:aea:aecrev:v:107:y:2017:i:3:p:931-65