Hamburger Prices and Spatial Econometrics

Arturs Kalnins

Journal of Economics & Management Strategy, 2003, vol. 12, issue 4, 591-616

Abstract: This paper applies spatial econometrics to hamburger price data to assess the degree of substitutability of products and locations of spatially dispersed franchised chains. First, while intrachain price variation exists, I find that hamburger prices at neighboring outlets of different chains are spatially uncorrelated. I conclude that their products are not close substitutes, which provides an explanation for why price promotions have not raised market share. I do find spatial price correlation, however, among proximate outlets of separate franchisees within the same chain. This finding implies that customers view proximate locations of a chain as substitutes.

Date: 2003
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