Multi-category competition and market power: a model of supermarket pricing

摘要

In many competitive settings consumers buy multiple product categories,and some prefer to use a single firm, generating complementarycross-category price effects. To study pricing in supermarkets,an organizational form where these effects are internalized,we develop a multi-category multi-seller demand modeland estimate it using UK consumer data. This class of modelis used widely in theoretical analysis of retail pricing. We quantifycross-category pricing effects and find that internalizing themsubstantially reduces market power. We find that consumers inclinedto one-stop (rather than multi-stop) shopping have a greaterpro-competitive impact because they generate relatively large crosscategoryeffects.