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Author: Muhammad Taimur Khan
Publisher:
ISBN:
Category : Regional economics
Languages : en
Pages : 137
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Book Description
Most empirical literature on Walmart Supercenters quantifies the price effect of Supercenter entries using lower frequency data (annual or monthly) and does not take into account finer geographical detail of retail markets experiencing Walmart entries. There is also very little empirical research on quantifying the impact of secondary entries by Walmart Supercenters in retail markets. We fill this gap by quantifying the price effect of secondary Supercenter entries into a specific retail market: Columbia, Missouri. We make use of hand-collected weekly price data spanning four time periods from 2006 to 2008 and do not find any evidence of negative price effect either in immediate term or in medium term following the opening of the two Walmart Supercenters in Columbia, Missouri. This result holds for all types of products and for grocery stores of all sizes. There is a dearth of economic literature that quantifies price pass-through following minimum-wage changes. We fill this gap by using a dataset of U.S minimum-wage histories from 1993-2012 along with micro-level price data on specific food products in the fast-food industry during the same time period. We find evidence that minimum-wage increases are associated with statistically significant increases in fast-food prices. However, we also find evidence that minimum-wage hikes are in fact endogenous to prevailing costs of living and correlated with the error term. This endogeniety bias suggests that that actual minimum-wage price elasticity may be much smaller than as estimated in earlier empirical literature on the subject.
Author: Muhammad Taimur Khan
Publisher:
ISBN:
Category : Regional economics
Languages : en
Pages : 137
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Book Description
Most empirical literature on Walmart Supercenters quantifies the price effect of Supercenter entries using lower frequency data (annual or monthly) and does not take into account finer geographical detail of retail markets experiencing Walmart entries. There is also very little empirical research on quantifying the impact of secondary entries by Walmart Supercenters in retail markets. We fill this gap by quantifying the price effect of secondary Supercenter entries into a specific retail market: Columbia, Missouri. We make use of hand-collected weekly price data spanning four time periods from 2006 to 2008 and do not find any evidence of negative price effect either in immediate term or in medium term following the opening of the two Walmart Supercenters in Columbia, Missouri. This result holds for all types of products and for grocery stores of all sizes. There is a dearth of economic literature that quantifies price pass-through following minimum-wage changes. We fill this gap by using a dataset of U.S minimum-wage histories from 1993-2012 along with micro-level price data on specific food products in the fast-food industry during the same time period. We find evidence that minimum-wage increases are associated with statistically significant increases in fast-food prices. However, we also find evidence that minimum-wage hikes are in fact endogenous to prevailing costs of living and correlated with the error term. This endogeniety bias suggests that that actual minimum-wage price elasticity may be much smaller than as estimated in earlier empirical literature on the subject.
Author: Janine Empen
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Category :
Languages : en
Pages : 0
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Author: Lucrezio Figurelli
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Category :
Languages : en
Pages : 0
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Author: Anil Kaul
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Category : Pricing
Languages : en
Pages : 280
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Author: Andres Elberg
Publisher:
ISBN:
Category :
Languages : en
Pages : 250
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This dissertation consists of three essays on the dynamics of retail prices. The first chapter uses a novel data set of weekly-sampled store-level retail prices for narrowly defined goods observed across 12 cities in Mexico to study the relative magnitude of aggregation biases in estimates of convergence to the Law of One Price (LOP). I find that temporal aggregation can severely bias estimates of persistence in relative prices. Both panel estimations of higher-order autoregressive processes and Monte Carlo experiments suggest that using quarterly aggregated data (from weekly-sampled data) can overestimate the half-life of deviations from the Law of One Price (LOP) by a factor of 4. I do not find evidence that pooling across goods with heterogeneous dynamics biases persistence estimates. The analysis also suggests that intercity prices converge rapidly to the LOP in an absolute sense (the median half-life is estimated at 3 weeks) and the existence of only a weak association between price gaps across cities and physical distance. The second chapter studies patterns of retail price adjustment at the store level using a unique scanner data set of weekly retail prices, quantities sold and wholesale costs for a cross-section of retailers in Chile. In line with evidence reported for the U.S. (Eichenbaum, Jaimovich and Rebelo, 2010; Klenow and Malin, 2010), posted prices tend to revolve around more persistent reference prices. The implied duration of reference prices is estimated at 2-3 quarters versus 3-4 weeks in the case of posted prices. I find strong evidence that reference prices respond to retailer-level shocks. Comovement in the reference price of a given barcode across retailers is found to be significantly larger for stores belonging to the same retail chain than for stores that belong to different retail chains. Furthermore, most of the variation in the frequency of reference price adjustment is explained by "chain effects". Evidence on the synchronization of price changes suggests that price changes tend to be staggered across stores belonging to different retail chains but synchronized within chains. The third chapter uses a scanner dataset including weekly prices and costs from a large retailer in Chile to study the relationship between price rigidities and intra-national deviations from the law of one price (LOP). I find that, controlling for transportation costs (proxied by distance), more flexible prices are associated with a larger volatility of deviations from the LOP. The effect is econominally non-negligible and holds for both retail- and wholesale-level prices. The distance equivalent of a 0.01 change in the frequency of retail (wholesale) price change is estimated at 370 (294) kilometers.
Author: Taehwan Kim (Ph.D. in Economics)
Publisher:
ISBN:
Category :
Languages : en
Pages : 86
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This dissertation consists of three chapters. The first chapter examines price dispersion in retail gasoline and focuses on differentiation along the service dimension: full service versus self service. Consistent with more intensive search by self-service customers, I find that price dispersion always decreases with the number of nearby self-service stations, but does not decrease with the number of nearby full-service stations. When I segment the market by brand, I observe that the estimates are sensitive to how brands are separated into different types. These findings show that the market is more clearly segmented by service level than by brand type and also highlight the importance of product differentiation when modeling price dispersion. In the second chapter, I examine product positioning and pricing strategies of sellers in a market undergoing a significant restructuring using data from the introduction of self-service technology in the Korean gasoline market in the 2000s. I show that the decision of full-service sellers to exit or switch to self service is positively correlated with the intensity of competition they face. The pricing strategies of sellers differ by product position: self-service sellers compete for price-sensitive consumers, whereas full-service sellers differentiate their product by offering a variety of bundled products and services, such as coffee, carwash or even a nail salon, to compete for less-price-sensitive consumers. Taken together, these patterns have led to an increase in the full-service premium during the market transition. In the third chapter, I study the effect of a government contract on price. Since 2013, Korean government officials have been required to refuel at contracted gasoline stations, at about 5% discounts relative to the posted price. The initial contract terminated in November 2015 and a new group of sellers took over the contract. In this paper, I use this natural experiment to examine the impact of the government contract on gasoline prices, using a difference-in-difference analysis and price data on all gasoline stations in Seoul. I find that, all else equal, posted prices of contracted gasoline stations are about 2% higher than those of non-contracted stations. This finding is consistent with the prediction of models of price discrimination that prices decrease when the elasticity of demand falls. The effect on prices is not uniform across all stations, however. The contract leads to larger increases in full-service stations' posted prices than in self-service stations' prices, and larger increases at stations with fewer nearby competitors. The contract also decreases prices of non-contracted stations very close to contracted stations.
Author: Thunyarat Amornpetchkul
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Matthew Stephen Lewis
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Category :
Languages : en
Pages : 244
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Author: Edona Reshidi
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Category :
Languages : en
Pages :
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This thesis consists of three essays that study issues arising in vertical markets with consumer search. The first essay analyses wholesale price discrimination, the second essay examines vertical bargaining and obfuscation and the third essay evaluates the effect of regulated recommended retail prices. In the first essay we show that manufacturers have an incentive to offer different retailers different contracts. The mechanism relies on consumers having heterogeneous search costs. Expecting price dispersion in the retail market, consumers are induced to search. Low-cost retailers sell to a disproportionately larger share of low search cost consumers, while high-cost retailers also lower margins given their smaller customer base. In this way, by discriminating, manufacturers can create a more competitive retail market and increase their profits. We find that consumers can be better off under wholesale price discrimination. The second essay models manufacturer practices that impede consumer search. Examples include vertical informational restraints such as Minimum Advertised Prices (MAPs) and bans on online sales. We find that once the bargaining power rests with the manufacturer, the equilibrium involves no obfuscation. The final consumers, however, are worse off compared to settings when the retailers have all the bargaining power. We show that policies that impose caps on obfuscation may backfire since they induce higher wholesale and retail prices. Finally, the third essay studies the effect of regulation that requires some sales to take place at Recommended Retail Prices (RRPs). We argue that this regulation enables manufacturers to commit to their unobserved contracts and discriminate their retailers. Given the regulation, manufacturers are not free to deviate and sell to all retailers at lower wholesale prices that generate more profits. We show that without this regulation on RRPs only uniform pricing can be sustained as an equilibrium outcome and that consumers would be better off.
Author: Huanhuan Qi
Publisher:
ISBN:
Category :
Languages : en
Pages : 78
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This dissertation is concerned with pricing issues facing manufacturers when retailers offer periodic discounts and customers stockpile in response. Chapter 1 provides an overview of the dissertation. In Chapter 2, we study a new Pareto-improving pricing scheme in which the manufacturer subsidizes the retailer's setup (transportation) cost in exchange for a (possibly) higher wholesale price. The retailer responds by choosing regular and discount prices and his order frequency to maximize his revenue less setup, purchasing and inventory holding costs, considering the customers' response. There are two customer segments that differ in their reservation prices and inventory holding costs. Customers make purchasing (including stockpiling) decisions to maximize their utility from consumption less purchasing and inventory holding costs. We characterize the retailer's optimal response to the manufacturer's pricing decisions and the consumers' response to the retailer's pricing schemes. We then show how to solve the manufacturer's decision problem in view of the downstream responses. In Chapter 3, we investigate the retailer's pass--through of manufacturer trade discounts. The manufacturer offers a fixed wholesale price and periodic trade discounts. The retailer optimizes his ordering plan (including stockpiling when a trade discount is offered) and the pattern of discounts to offer to customers, seeking to maximize revenue less setup, purchasing and inventory holding costs. Customers differ in their reservation prices, and in our model, we account for the adverse effect of retail discounts on consumers' reservation prices. For a given frequency and depth of the manufacturer's trade discount, we characterize the retailer's optimal discounting pattern for a given ordering schedule that spans the time between the manufacturer's trade discount offers. We solve for the retailer's jointly optimal ordering and discounting patterns by enumerating appropriate ordering schedules and optimizing the retailer's discount pattern for each. For the models in Chapters 2 and 3, we also perform associated numerical studies which, together with our analytical results, provide insight into how both manufacturers and retailers should make decisions in these problem settings, and circumstances in which various policies are most effective in increasing profit. Chapter 4 concludes the dissertation with a summary of contributions and key findings.
