제목 : Cross-subsidization Pricing by Multiproduct Retailers: Some Evidence from U.S. Scanner Data


저자: Hyunchul Kim and Jungwon Yeo



Abstract
When consumers tend to buy multiple products in a store, a retailer has the incentive to set the price of each product in consideration of its effects on the sales of other products. And, such an incentive may manifest in the form of cross-subsidization: stores use low prices of some products to lure customers into the stores to profit off of high prices (or margins) of other products; that is, the latter products cross-subsidize the former. We herein attempt to document patterns of cross-subsidization pricing in the US supermarket/grocery store industry in 2006. The main difficulty in this quest is the ambiguity in regard to which products are the subsidized and which products are the subsidizing. Our strategy is to explore the characterizations of the cross-subsidized (loss-leaders) and the cross-subsidizing, provided by scant but valuable theories on the subject. Our main findings are twofold. First, we find the lower advertised prices are accompanied by the higher unadvertised prices. Second, we find that while full-line stores generally tend to set lower prices for the products that are more easily found in other stores in the market, this tendency is amplified when there is a limited line store in the market, in accordance with the characterization of cross-subsidization pricing by Chen and Rey (2012).