Multiproduct retailing and consumer shopping behavior: The role of shopping costs

Jorge Florez-Acosta and Daniel Herrera-Araujo

International Journal of Industrial Organization, 2020, vol. 68, issue C

Abstract: We empirically examine the role of shopping costs in consumer shopping behavior in a context of competing differentiated supermarkets that supply similar product lines. We develop and estimate a model of demand in which consumers can purchase multiple products from multiple stores in the same week, and incur transaction costs of dealing with supermarkets. We show that a similar model without shopping costs predicts a larger proportion of multistop shoppers and overestimates own-price elasticities and product markups. Further, we use our model along with a model of competition between supermarkets to study two practices that are commonly used by supermarkets: product delisting and loss-leader pricing. We show that the presence of shopping costs makes product delisting less profitable whereas it makes loss-leader pricing more profitable compared to a context in which consumers do not incur shopping costs.

Keywords: Supermarket competition; Market power; Multistop shopping; Shopping costs; Product delisting; Loss-leader pricing (search for similar items in EconPapers)
JEL-codes: D12 L13 L81 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:68:y:2020:i:c:s0167718719300888

DOI: 10.1016/j.ijindorg.2019.102560

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