National pricing with local quality competition

Tommy Gabrielsen, Bjørn Olav Johansen () and Odd Rune Straume
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Bjørn Olav Johansen: University of Bergen, Department of Economics, Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway, https://www.uib.no/en/persons/Bj%C3%B8rn.Olav.Johansen

No 8/20, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. In addition to price, the chains may also compete along a quality dimension, and quality is always set locally. We show that absent quality competition, the chains will never use national pricing. However, if quality competition is sufficiently strong there exist equilibria where at least one of the chains adopts national pricing. We also identify cases in which national pricing benefits (harms) all consumers, even in markets where such a pricing strategy leads to higher (lower) prices.

Keywords: National pricing; local pricing; retail chains; price and quality competition (search for similar items in EconPapers)
JEL-codes: L11 L13 L21 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2020-11-11
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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Related works:
Journal Article: National pricing with local quality competition (2023)
Working Paper: National pricing with local quality competition (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:bergec:2020_008

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