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

Jorge Florez-Acosta, Daniel Herrera-Araujo

Research output: Contribution to journalArticle

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.
Original languageEnglish
Pages (from-to)1
Number of pages30
JournalInternational Journal of Industrial Organization
Volume68
Early online dateNov 22 2019
DOIs
Publication statusPublished - Jan 2 2020

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