Competitive Price Discrimination Strategies in a Vertical Channel Using Aggregate Retail Data

Besanko, David; Dubé, Jean-Pierre; Gupta, Sachin

doi:10.1287/mnsc.49.9.1121.16565

Cited by 157 publications

(119 citation statements)

References 32 publications

(36 reference statements)

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“…With respect to cross pass-through, Besanko, Dube and Gupta (2005) find that about twothirds of the cross pass-through effects are statistically different from zero. Slightly more than a third of these effects are negative, while slightly less than a third of these effects are positive.…”

Section: Empirical Results On Pass-throughmentioning

confidence: 87%

“…However, Armstrong (1991), Walters (1989) and Besanko, Dube and Gupta (2005) find that pass-through rates can be greater than 100% for certain products. While Armstrong and Walters use a multiplicative functional form for demand (which, as we discussed earlier, leads to greater than 100% pass-through), Besanko et al estimate a reduced-form regression for pass-through across products in several categories without making any assumptions about the functional form of demand or retailers' objectives (category or brand profit maximization).…”

Section: Empirical Results On Pass-throughmentioning

confidence: 99%

“…Besanko, Dube and Gupta (2003) study optimal targeted pricing on behalf of manufacturers in the presence of retailer, using aggregate data within a competitive setting. Pancras and Sudhir (2007) study the optimal marketing strategies of a customer data intermediary, who needs to consider the value of its target pricing services to manufacturers in the presence of a retailer who sets retail prices.…”

Section: Policy Analysis Within a Channel Settingmentioning

confidence: 99%

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Pricing in Marketing Channels

Sudhir¹,

Datta²

2009

Handbook of Pricing Research in Marketing

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This paper provides a critical review of research on pricing within a channel environment. We first describe the literature in terms of increasing time horizons of decision making in a channel setting: (1) retail pass-through (2) pricing contracts and (3) channel design; all of which occur within a given market environment. We then describe the emerging empirical literature on structural econometric models of channels and its use in (1) inferring channel participant behavior and (2) policy simulations in a channel setting. We also discuss potential areas for future research in each area. Pricing in Marketing Channels"Price" and "Channel" are two of the four elements of the marketing mix that managers control, yet they differ fundamentally in how managers can use them to impact market demand.While price is the most flexible, in that managers can change it most easily to impact short-run demand, the distribution channel through which firms reach their end consumer is the least flexible and perhaps the costliest to change in the short run. Therefore, channel design is viewed as part of a firm's long run strategy. Most importantly, in the presence of a typically decentralized distribution channel, an upstream price change by a manufacturer does not affect consumer demand directly, but only through how this upstream price change affects the retail price set downstream in the channel.In his review of the pricing literature, Rao (1984) stated that "the issues of pricing along the distribution channel… have not received much attention in the literature." However, over the last 25 years, this gap has been remedied substantially. The tools of game theory have revolutionized the theoretical analysis of pricing within the channel and clarified the many issues about how prices are set within a channel; more importantly, these analyses have given insights on the optimal long-term channel strategy, given how prices will be set within the channel. A smaller but emerging empirical literature on structural models of channels has provided us insights on the behavior of channel participants and tools to perform policy analysis in a channel setting. The purpose of this article is to provide a critical review of this literature, identify the key themes of understanding that have emerged from research to-date and to identify important gaps in our knowledge that would benefit from future research.Given the short-run nature of price and the long-run nature of the channel, we organize the literature in terms of three key issues of managerial interest that progressively increase in their time horizons for the decision. The three sets of questions are:1. Conditional on the distribution channel (which is fixed in the short run) and other market characteristics, how can a change in upstream price affect the downstream price seen by the end consumer? This question of "pass-through" is the most short-term of the three sets of decisions we consider. Pass-through is of interest to an upstream manager because it determines the extent to w...

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Section: Empirical Results On Pass-throughmentioning

confidence: 87%

Section: Empirical Results On Pass-throughmentioning

confidence: 99%

Section: Policy Analysis Within a Channel Settingmentioning

confidence: 99%

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Pricing in Marketing Channels

Sudhir¹,

Datta²

2009

Handbook of Pricing Research in Marketing

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“…Some papers in this literature impose one-stop shopping (Stahl (1982), Beggs (1992), Smith and Hay (2005)) while others model the multi-stop shopping decision (Klemperer (1992), Armstrong and Vickers (2010), Chen and Rey (2012)). 7 The empirical literature on retail market power-in contrast to the theoretical literature, as noted in Smith and Thomassen (2012)-has typically not incorporated cross-category externalities. We adapt the multi-store multi-category theoretical framework for empirical analysis.…”

Section: Introductionmentioning

confidence: 99%

“…We report estimates in Section 5 and in Section 6 we analyze supermarket pricing. 7 Some papers (e.g. Lal and Matutes (1994), Lal and Rao (1997)) use this theoretical framework to study aspects of supermarket pricing (e.g.…”

Section: Introductionmentioning

confidence: 99%

Multi-Category Competition and Market Power: A Model of Supermarket Pricing

Thomassen¹,

Smith²,

Seiler

et al. 2017

American Economic Review

130

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In many competitive settings consumers buy multiple product categories, and some prefer to use a single firm, generating complementary cross-category price effects. To study pricing in supermarkets, an organizational form where these effects are internalized, we develop a multi-category multi-seller demand model and estimate it using UK consumer data. This class of model is used widely in theoretical analysis of retail pricing. We quantify crosscategory pricing effects and find that internalizing them substantially reduces market power.We find that consumers inclined to one-stop (rather than multi-stop) shopping have a greater pro-competitive impact because they generate relatively large cross-category effects.

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Bayesian estimation of random‐coefficients choice models using aggregate data

Musalem

Bradlow

Raju

2009

J of Applied Econometrics

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SUMMARYThis article discusses the use of Bayesian methods for estimating logit demand models using aggregate data. We analyze two different demand systems: independent samples and consumer panel. Under the first system, there is a different and independent random sample of N consumers in each period and each consumer makes only a single purchase decision. Under the second system, the same N consumers make a purchase decision in each of T periods. Interestingly, there exists an asymptotic link between these two systems, which has important implications for the estimation of these demand models. The proposed methods are illustrated using simulated and real data.

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Competitive Price Discrimination Strategies in a Vertical Channel Using Aggregate Retail Data

Cited by 157 publications

References 32 publications

Pricing in Marketing Channels

Pricing in Marketing Channels

Multi-Category Competition and Market Power: A Model of Supermarket Pricing

Bayesian estimation of random‐coefficients choice models using aggregate data

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