Different Flavor, Same Price: The Puzzle of Uniform Pricing for Differentiated Products
46 Pages Posted: 28 Nov 2006
Date Written: January 17, 2007
Abstract
Retailers typically sell many different products from the same manufacturer at the same price. I consider managerial menu costs as an explanation for this uniform pricing puzzle, using a structural model to estimate the counterfactual profits that would be lost by a retailer switching from a non-uniform to a uniform pricing regime in the carbonated soft drink category. The results suggest that when a retail store faces even a relatively small cost to determine optimal non-uniform prices, it may be optimal to charge the same price for many products.
Keywords: pricing, line pricing, flavors, differentiated products, method of simulated moments, retail, grocery
JEL Classification: C13, C33, D12, D43, D81
Suggested Citation: Suggested Citation
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