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Rey, Patrick
and Chen, Zhijun
(2012)
Loss Leading as an Exploitative Practice.
American Economic Review (AER), 102 (7).
pp. 3462-3482.
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Abstract
We show that large retailers, competing with smaller stores that carry a narrower range, can exercise market power by pricing below cost some of the products also offered by the smaller rivals, in order to discriminate multi-stop shoppers from onestop shoppers. Loss leading thus appears as an exploitative device rather than as an exclusionary instrument, although it hurts the smaller rivals as well; banning below-cost pricing increases consumer surplus, rivals’ profits, and social welfare. Our insights extend to industries where established firms compete with entrants offering fewer products. They also apply to complementary products such as platforms and applications.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | 2012 |
| Refereed: | Yes |
| Uncontrolled Keywords: | loss leading, exploitative practice, retail power |
| JEL Classification: | L11 - Production, Pricing, and Market Structure; Size Distribution of Firms L41 - Monopolization; Horizontal Anticompetitive Practices |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 09 Jul 2014 17:23 |
| Last Modified: | 02 Apr 2021 15:47 |
| OAI Identifier: | oai:tse-fr.eu:25645 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15221 |
Available Versions of this Item
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Loss Leading as an Exploitative Practice. (deposited 18 Jan 2012 06:03)
- Loss Leading as an Exploitative Practice. (deposited 09 Jul 2014 17:23) [Currently Displayed]
