An empirical study of national vs. Local pricing by chain stores under competition

Yang Li*, Brett R. Gordon, Oded Netzer

*Corresponding author for this work

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

Geographic price discrimination is generally considered beneficial to firm profitability. However, theoretical results point to conditions under which firms might prefer to price across markets uniformly in oligopolistic settings. This paper provides an empirical analysis of competitive price discrimination and quantitatively assesses the profitability of national pricing relative to store-level pricing policies under different market conditions. Specifically, we construct and estimate a model of retail competition using extensive data from the digital camera market. A series of counterfactuals show that, under reasonable commitment mechanisms, two leading chains would benefit from employing national pricing policies, whereas a discount retailer should target prices in each local market. Additional results explore the boundary conditions of these findings and evaluate hybrid pricing policies.

Original languageEnglish (US)
Pages (from-to)812-837
Number of pages26
JournalMarketing Science
Volume37
Issue number5
DOIs
StatePublished - Sep 1 2018

Keywords

  • Competitive strategy
  • Geographic price targeting
  • Hybrid pricing policy
  • Local pricing policy
  • National pricing policy
  • Pricing
  • Retailing

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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