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Hump-shaped cross-price effects and the extensive margin in cross-border shopping

Frode Steen

No 13650, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store*category sales data from Norway's largest grocery chain 2011-2016. The sensitivity of demand to foreign price is hump-shaped and greatest 30-60 minutes' driving distance from the closest foreign store. Combining continuous demand, fixed costs of cross-border shopping and linear transport costs `a la Hotelling we show how this hump-shape can arise through a combination of intensive and extensive margins of cross-border shopping. Our conclusions are further supported by novel survey evidence and cross-border traffic data.

Keywords: competition in grocery markets; Cross-border shopping; product differentiation (search for similar items in EconPapers)
JEL-codes: F15 H73 L66 R20 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-com, nep-tre and nep-ure
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Working Paper: Hump-shaped cross-price effects and the extensive margin in cross-border shopping (2019) Downloads
Working Paper: Hump-shaped cross-price effects and the extensive margin in cross-border shopping (2018) Downloads
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