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Negative market value and loss leading

Stephane Caprice and Shiva Shekhar ()
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Shiva Shekhar: Düsseldorf Intitute for Competition Economics (DICE), Heinrich-Heine-Universität

Economics Bulletin, 2019, vol. 39, issue 1, 94-103

Abstract: Multi-product retailers competing with smaller retailers can exercise market power by pricing below cost products also offered by smaller rivals. Loss-leading is not a predatory strategy: rather pro-competitive justifications are invoked. Unlike standard textbook models, we show that positive market value, that is, consumer valuation larger than production cost, is not required in this line of research examining the phenomenon of loss-leading. Multi-product retailers can supply products offering negative market value. We use this insight to revisit some classic issues in vertical relations.

Keywords: Multi-product retailers; loss-leading; negative market value (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2019-01-10
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