Negative consumer value and loss leading

Abstract

Large retailers competing with smaller stores that carry a narrower range can exercise market power by pricing below cost for some of their products. Below-cost pricing arises as an exploitative device rather than a predatory device (e.g., Chen and Rey, 2012). Unlike standard textbook models, we show that positive consumer value is not required in these frameworks. Large retailers can sell products offering consumers a negative value. We use this insight to revisit some classic issues in vertical relations.

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Replaced by

Stéphane Caprice, and Shiva Shekhar, “Negative market value and loss leading”, Economics Bulletin, vol. 39, n. 1, January 2019, pp. 94–103.

Reference

Stéphane Caprice, and Shiva Shekhar, “Negative consumer value and loss leading”, TSE Working Paper, n. 17-835, August 2017.