A rationale for repealing the 1987 Groceries Order

Ciara Whelan and Patrick Walsh ()

Open Access publications from School of Economics, University College Dublin

Abstract: A ban on pricing below cost was implemented under the 1987 Groceries Order based on the premise that loss leading used in multi-product retail pricing distorts competition and exploits consumers in the short run, while driving a more concentrated structure and reducing welfare in the long run. Loss leading is examined for multi-product retailers selling in imperfectly competitive market niches with imperfect consumer information. We develop a theoretical argument in a simple two-stage framework that illustrates how loss leading on a subset of products is an equilibrium outcome of price competition that leaves overall welfare equal to that observed under laissez faire.

Keywords: Grocery trade--Law and legislation; Price regulation--Ireland; Loss leaders--Ireland (search for similar items in EconPapers)
Pages: 9 pages
Date: 1999
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Citations: View citations in EconPapers (1)

Published in: Economic and Social Review, 30(1) 1999

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http://hdl.handle.net/10197/127 Open Access version, 1999 (application/pdf)

Related works:
Journal Article: A Rationale for Repealing the 1987 Groceries Order (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:oapubs:10197/127

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