Uniform Pricing in US Retail ChainsStefano DellaVigna, Matthew Gentzkow
NBER Working Paper No. 23996 We show that most US food, drugstore, and mass merchandise chains charge nearly-uniform prices across stores, despite wide variation in consumer demographics and competition. Demand estimates reveal substantial within-chain variation in price elasticities and suggest that the median chain sacrifices $16m of annual profit relative to a benchmark of optimal prices. In contrast, differences in average prices between chains are broadly consistent with the optimal benchmark. We discuss a range of explanations for nearly-uniform pricing, highlighting managerial inertia and brand-image concerns as mechanisms frequently mentioned by industry participants. Relative to our optimal benchmark, uniform pricing may significantly increase the prices paid by poorer households relative to the rich, dampen the response of prices to local economic shocks, alter the analysis of mergers in antitrust, and shift the incidence of intra-national trade costs. A non-technical summary of this paper is available in the March 2018 NBER Digest.
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Supplementary materials for this paper: Acknowledgments and Disclosures Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w23996 Users who downloaded this paper also downloaded* these:
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