References (37)



Unplanned Purchases and Retail Competition

Justin P. Johnson

Cornell University - Samuel Curtis Johnson Graduate School of Management

October 6, 2016

I propose a framework in which asymmetric multi-product retailers compete for one-stop shoppers who have biased beliefs about their future purchase probabilities (and so make unplanned purchases). One firm carries a full portfolio of products while the other carries an incomplete but endogenous one. Using this framework, I examine the phenomenon of loss leading, the optimal product portfolio of the smaller firm, and the effects of banning loss leading. Among other results, I show that there is a non-predatory (and possibly pro-competitive) justification for the observation that such larger firms may charge below cost on the core product lines of their smaller rivals.n.

Number of Pages in PDF File: 40

Keywords: Unplanned Purchase, Bias, Loss leading, Below Cost Pricing

JEL Classification: L1, L4

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Date posted: September 4, 2013 ; Last revised: October 7, 2016

Suggested Citation

Johnson, Justin P., Unplanned Purchases and Retail Competition (October 6, 2016). Available at SSRN: https://ssrn.com/abstract=2319929 or http://dx.doi.org/10.2139/ssrn.2319929

Contact Information

Justin P. Johnson (Contact Author)
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States

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