Pricing Behavior of Multiproduct Retailers

FTC Bureau of Economics Working Paper No. 225

42 Pages Posted: 11 Oct 2006

See all articles by Daniel S. Hosken

Daniel S. Hosken

Government of the United States of America - Federal Trade Commission

David Reiffen

U.S. Commodity Futures Trading Commission (CFTC)

Date Written: June 2007

Abstract

This paper develops a model of competition among multiproduct retailers that is consistent with observed pricing regularities, e.g., virtually all products have large mass points in their price distributions and most deviations fall below the mass point. The basis of the model is that, because consumers prefer to buy a bundle of goods from the same retailer, a given discount on any one good in the bundle will have a similar effect on consumers' likelihood of visiting that retailer. This implies that discounts on goods sold by a single retailer are substitute instruments for retailers, and factors that influence one good's price will affect the pricing of other goods. Hence, if intertemporal price changes are a means of price discriminating (as suggested in the literature), the impact of these changes will be reflected in the prices of many goods, including those for which discrimination is not feasible.

Keywords: Multiproduct retailing, Pricing Dynamics, Sales

JEL Classification: L81, L4, L11, D21

Suggested Citation

Hosken, Daniel S. and Reiffen, David, Pricing Behavior of Multiproduct Retailers (June 2007). FTC Bureau of Economics Working Paper No. 225, Available at SSRN: https://ssrn.com/abstract=936665 or http://dx.doi.org/10.2139/ssrn.936665

Daniel S. Hosken (Contact Author)

Government of the United States of America - Federal Trade Commission ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States

David Reiffen

U.S. Commodity Futures Trading Commission (CFTC) ( email )

Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
United States