Multiproduct Search and Retail Pricing : Some Empirical Results

The existence of fixed costs of shopping (or search) and consumers' tendency to shop for multiple products induces multiproduct retailers to price otherwise independent products with consideration for one another. Theoretical papers have provided insight into how multiproduct retailers price their products in such an environment. We herein empirically test theories on multiproduct pricing, focusing on Lal and Matutes (1994), Chen and Ray (2012) and Rhodes (2015). Using supermarket scanner data, we provide evidence supporting the exploitive cross-subsidization proposed by Chen and Ray (2012). We also find the effect of economies of scale in search on firms' pricing behavior characterized by Rhodes (2015)