Multiproduct retailing and consumer shopping behavior: The role of shopping costs
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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. © 2019 Elsevier B.V.
Consumer behavior , Cost benefit analysis , Profitability , Retail stores , Consumer shopping , Market Power , Multiple products , Multistop shopping , Own-price elasticities , Product delisting , Similar models , Transaction cost , Costs , Loss-leader pricing , Market power , Multistop shopping , Product delisting , Shopping costs , Supermarket competition