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.
Keywords
Multi-product retailers, loss-leading; negative consumer value;
JEL codes
- L13: Oligopoly and Other Imperfect Markets
- L81: Retail and Wholesale Trade • e-Commerce
Replaces
Stéphane Caprice, and Shiva Shekhar, “Negative consumer value and loss leading”, TSE Working Paper, n. 17-835, August 2017.
Reference
Stéphane Caprice, and Shiva Shekhar, “Negative market value and loss leading”, Economics Bulletin, vol. 39, n. 1, January 2019, pp. 94–103.
See also
Published in
Economics Bulletin, vol. 39, n. 1, January 2019, pp. 94–103