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Negative consumer value and loss leading

Stéphane Caprice and Shiva Shekhar

No 17-835, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Large retailers competing with smaller stores that carry a narrower range can exercise market power by pricing below cost for some of their products. Below-cost pricing arises as an exploitative device rather than a predatory device (e.g., Chen and Rey, 2012). Unlike standard textbook models, we show that positive consumer value is not required in these frameworks. Large retailers can sell products offering consumers a negative value. We use this insight to revisit some classic issues in vertical relations.

Keywords: Multi-product retailers; loss-leading; negative consumer value (search for similar items in EconPapers)
JEL-codes: L13 L81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
Date: 2017-08
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