Buyer Shopping Costs and Retail Pricing: An Indirect Empirical Test
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Sang-Yong T. Lee
Suppose that consumers incur fixed shopping costs and choose stores according to advertised discounts. Then, the extent to which a store will discount advertised items should increase with the profit from other regularly-priced items. Bookstores customarily advertise discounts on bestsellers. Among conventional bookstores, we found that the bestseller discount systematically increased with the store area, selection of titles, and presence of other product categories. One standard deviation increase in store area was associated with a 3.7 (± 1.8) higher bestseller percentage discount. Among online stores, we found that the bestseller discount systematically increased with the selection of titles and number of product categories. One standard deviation increase in selection was associated with a 9.5 (± 2.2) higher bestseller percentage discount. These results indirectly confirm that booksellers discount bestsellers to attract consumers, and that consumers bear significant fixed shopping costs.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Assessing Heterogeneity in Discrete Choice Models Using a Dirichlet Process Prior
- Durable Good, Extended Warranty and Channel Coordination
- The Relationship between Market Share and Information in a High-Tech Industry
- Product Entry Timing in Dual Distribution Channels: The Case of the Movie Industry
- Holding Company Cost Economies in the Global Advertising and Marketing Services Business
- Buyer Shopping Costs and Retail Pricing: An Indirect Empirical Test
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