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Discussion Paper Details

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Full Details

Title: Hump-shaped cross-price effects and the extensive margin in cross-border shopping

Author(s): Frode Steen

Publication Date: April 2019

Keyword(s): competition in grocery markets, Cross-border shopping and product differentiation

Programme Area(s): Industrial Organization

Abstract: This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store*category sales data from Norway's largest grocery chain 2011-2016. The sensitivity of demand to foreign price is hump-shaped and greatest 30-60 minutes' driving distance from the closest foreign store. Combining continuous demand, fixed costs of cross-border shopping and linear transport costs `a la Hotelling we show how this hump-shape can arise through a combination of intensive and extensive margins of cross-border shopping. Our conclusions are further supported by novel survey evidence and cross-border traffic data.

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Bibliographic Reference

Steen, F. 2019. 'Hump-shaped cross-price effects and the extensive margin in cross-border shopping'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13650