Zone Pricing in Retail Oligopoly

Brian Adams and Kevin Williams

No 2079R2, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in rural markets, where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer price discrimination does.

Keywords: Zone pricing; Market segmentation; Price discrimination in oligopoly; Micromarketing; Retailing (search for similar items in EconPapers)
JEL-codes: C13 L67 L81 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2017-02, Revised 2017-12
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in American Economic Journal: Microeconomics, (February 2019), 11 (1): 124-156

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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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