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Multiproduct retailing and consumer shopping behavior: The role of shopping costs

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  • Florez-Acosta, Jorge
  • Herrera-Araujo, Daniel
Abstract
We empirically examine the role of shopping costs in consumer shopping behavior in a context of competing differentiated supermarkets that supply similar product lines. We develop and estimate a model of demand in which consumers can purchase multiple products from multiple stores in the same week, and incur transaction costs of dealing with supermarkets. We show that a similar model without shopping costs predicts a larger proportion of multistop shoppers and overestimates own-price elasticities and product markups. Further, we use our model along with a model of competition between supermarkets to study two practices that are commonly used by supermarkets: product delisting and loss-leader pricing. We show that the presence of shopping costs makes product delisting less profitable whereas it makes loss-leader pricing more profitable compared to a context in which consumers do not incur shopping costs.

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  • Florez-Acosta, Jorge & Herrera-Araujo, Daniel, 2020. "Multiproduct retailing and consumer shopping behavior: The role of shopping costs," International Journal of Industrial Organization, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:indorg:v:68:y:2020:i:c:s0167718719300888
    DOI: 10.1016/j.ijindorg.2019.102560
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    Cited by:

    1. Florez-Acosta, Jorge, 2021. "Do preferences for private labels respond to supermarket loyalty programs?," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 183-208.
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    4. Alessandro Iaria, & Wang, Ao, 2021. "An Empirical Model of Quantity Discounts with Large Choice Sets," The Warwick Economics Research Paper Series (TWERPS) 1378, University of Warwick, Department of Economics.
    5. Zhou, Xiaoyang & Chen, Kexin & Wen, Haoyu & Lin, Jun & Zhang, Kai & Tian, Xin & Wang, Shouyang & Lev, Benjamin, 2021. "Integration of third-party platforms: Does it really hurt them?," International Journal of Production Economics, Elsevier, vol. 234(C).
    6. Lukas Delgado-Prieto & Andrea Otero-Cortés & Andrés Calderón, 2024. "The Impact of Hard Discount Stores on Local Labor Markets: Evidence from Colombia," Documentos de trabajo sobre Economía Regional y Urbana 326, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Supermarket competition; Market power; Multistop shopping; Shopping costs; Product delisting; Loss-leader pricing;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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