Retail Zone Pricing and Simulated Price Effects of Upstream Mergers

Geoffrey Pofahl, Oral Capps and H. Love
Authors registered in the RePEc Author Service: ORAL CAPPS Jr. and Oral Capps, Jr.

International Journal of the Economics of Business, 2006, vol. 13, issue 2, 195-215

Abstract: Despite the oft-recognized reality of zone pricing by food retailers, this form of price discrimination has received very little attention within the context of upstream merger analysis. Promoting this issue to 'center stage', we relax the conventional merger simulation assumption of uniform pass-through by retailers. Relaxing this assumption allows us to explore the potential impacts of zone pricing on post-merger price effects. Using the ready-to-eat cereals industry as a backdrop, we show empirically that high-income price zones are more significantly affected by post-merger price increases than low-income price zones. Ignoring retail price discrimination veils a potentially complex and diverse set of price effects that are otherwise lost by averaging across all price zones.

Keywords: Merger simulation; Retail price discrimination; LA/AIDS demand model (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/13571510600784433

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