Price Dispersion and Loss Leaders

DSpace/Manakin Repository

Price Dispersion and Loss Leaders

Citable link to this page

. . . . . .

Title: Price Dispersion and Loss Leaders
Author: Weinstein, Jonathan; Ambrus, Attila

Note: Order does not necessarily reflect citation order of authors.

Citation: Ambrus, Attila, and Jonathan Lewis Weinstein. 2008. Price dispersion and loss leaders. Theoretical Economics 3(4): 525-537.
Full Text & Related Files:
Abstract: Dispersion in retail prices of identical goods is inconsistent with the standard model of price competition among identical firms, which predicts that all prices will be driven down to cost. One common explanation for such dispersion is the use of a loss-leader strategy, in which a firm prices one good below cost in order to attract a higher customer volume for profitable goods. By assuming each consumer is forced to buy all desired goods at a single firm, we create the possibility of an effective loss-leader strategy. We find that such a strategy cannot occur in equilibrium if individual demands are inelastic, or if demands are diversely distributed. We further show that equilibrium loss leaders can occur (and can result in positive profits) if there are demand complementarities, but only with delicate relationships among the preferences of all consumers.
Published Version: http://www.econtheory.org/ojs/index.php/te/article/view/20080525
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4589708

Show full Dublin Core record

This item appears in the following Collection(s)

  • FAS Scholarly Articles [6464]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

Search DASH


Advanced Search
 
 

Submitters