TY - JOUR
AU - Rhodes, Andrew
AB - We study the pricing behaviour of a multiproduct firm, when consumers must pay a search cost to learn its prices. Equilibrium prices are high, because consumers understand that visiting a store exposes them to a hold-up problem. However, a firm with more products charges lower prices, because it attracts consumers who are more price sensitive. Similarly, when a firm advertises a low price on one product, consumers rationally expect it to charge somewhat lower prices on its other products as well. We therefore find that having a large product range, and advertising a low price on one product, are substitute ways of building a low-price image. Finally, we show that in a competitive setting each product has a high regular price, with firms occasionally giving random discounts that are positively correlated across products.
TI - Multiproduct Retailing
JF - The Review of Economic Studies
DO - 10.1093/restud/rdu032
DA - 2015-01-18
UR - https://www.deepdyve.com/lp/oxford-university-press/multiproduct-retailing-1rNeyVI4Aa
SP - 360
EP - 390
VL - 82
IS - 1
DP - DeepDyve
ER -