Negative market value and loss leading

Caprice, Stéphane and Shekhar, Shiva (2019) Negative market value and loss leading. Economics Bulletin, vol. 39 (n° 1). pp. 94-103.

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Official URL: http://tse-fr.eu/pub/33245

Abstract

Multi-product retailers competing with smaller retailers can exercise market power by pricing below cost products also offered by smaller rivals. Loss-leading is not a predatory strategy: rather pro-competitive justifications are invoked. Unlike standard textbook models, we show that positive market value, that is, consumer valuation larger than production cost, is not required in this line of research examining the phenomenon of loss-leading. Multi-product retailers can supply products offering negative market value. We use this insight to revisit some classic issues in vertical relations.

Item Type: Article
Language: English
Date: January 2019
Refereed: Yes
Uncontrolled Keywords: Multi-product retailers, loss-leading, negative consumer value
JEL codes: L13 - Oligopoly and Other Imperfect Markets
L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 21 Jan 2019 13:13
Last Modified: 29 Jan 2019 12:59
OAI ID: oai:tse-fr.eu:33245
URI: http://publications.ut-capitole.fr/id/eprint/30823

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