Supermarkets and Gasoline: An Empirical Study of Bundled Discounts
Resources for the Future Discussion Paper 15-44
40 Pages Posted: 2 Oct 2015
Date Written: September 30, 2015
Abstract
Many supermarkets offer grocery-gasoline bundled discounts, whereby a supermarket customer whose grocery purchase exceeds a certain dollar amount is offered a gasoline price discount. I use the difference-in-differences method and an ideal gasoline price data set to study such programs’ effects on retail gasoline competition in a specific market. A program’s effect on a gasoline station depends on the features of the program, whether the site is operated by a supermarket, its distance from the nearest supermarket, and the time horizon. How the estimated effects vary with program features and station characteristics helps explain why such programs are offered.
Keywords: bundled discount, supermarkets, gasoline, competition, advertising
JEL Classification: K21, L4
Suggested Citation: Suggested Citation