Zone Pricing in Retail Oligopoly

Brian Adams

No 494, Economic Working Papers from Bureau of Labor Statistics

Abstract: We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. The use of zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing discrimination does.

Date: 2017
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Related works:
Journal Article: Zone Pricing in Retail Oligopoly (2019)
Working Paper: Zone Pricing in Retail Oligopoly (2017)
Working Paper: Zone Pricing in Retail Oligopoly (2017)
Working Paper: Zone Pricing in Retail Oligopoly (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bls:wpaper:494

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