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Zone Pricing in Retail Oligopoly

Brian Adams and Kevin R. Williams

American Economic Journal: Microeconomics, 2019, vol. 11, issue 1, 124-56

Abstract: We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home-improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe's would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in rural markets, where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer price discrimination does.

JEL-codes: D43 L13 L81 M31 R32 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mic.20170130
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Working Paper: Zone Pricing in Retail Oligopoly (2017) Downloads
Working Paper: Zone Pricing in Retail Oligopoly (2017) Downloads
Working Paper: Zone Pricing in Retail Oligopoly (2017) Downloads
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Handle: RePEc:aea:aejmic:v:11:y:2019:i:1:p:124-56