National pricing with local quality competition

Tommy Gabrielsen, Bjørn Olav Johansen and Odd Rune Straume

Journal of Economics & Management Strategy, 2023, vol. 32, issue 1, 48-74

Abstract: We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. In addition to price, the chains may also compete along a quality dimension, and quality is always set locally. We show that absent quality competition, the chains will never use national pricing. However, if quality competition is sufficiently strong there exist equilibria where at least one of the chains adopts national pricing. We also identify cases in which national pricing benefits (harms) all consumers, even in markets where such a pricing strategy leads to higher (lower) prices.

Date: 2023
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https://doi.org/10.1111/jems.12494

Related works:
Working Paper: National pricing with local quality competition (2020)
Working Paper: National pricing with local quality competition (2020)
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