Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, January 12, 2021

National pricing with local quality competition

National pricing with local quality competition

By:

Tommy Staahl Gabrielsen (University of Bergen); Bjørn Olav Johansen (University of Bergen); Odd Rune Straume (NIPE and Department of Economics, University of Minho and Department of Economics, University of Bergen)

Abstract:

We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. In addition to price, the chains may also compete along a quality dimension, and quality is always set locally. We show that absent quality competition, the chains will never use national pricing. However, if quality competition is sufficiently strong there exist equilibria where at least one of the chains adopts national pricing. We also identify cases in which national pricing bene ts (harms) all consumers, even in markets where such a pricing strategy leads to higher (lower) prices.

URL:

http://d.repec.org/n?u=RePEc:nip:nipewp:09/2020&r=com

https://lawprofessors.typepad.com/antitrustprof_blog/2021/01/national-pricing-with-local-quality-competition.html

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