Price discrimination in grocery trade: evidence from Italy
This paper investigates the determinants of price dispersion between staple and non-staple goods in grocery retailing, as the result of pricing decisions by multiproduct firms. Theoretical predictions about the nature of supermarkets' pricing behaviour are compared and tested empirically using disaggregated data from the Italian grocery trade over the period 1990 - 1992. The empirical results provide evidence for the existence, in all types of retail organization, of the form of price discrimination suggested by Bliss particularly for specialist shops. The results are consistent with discrimination due to the exploitation of consumers' switching costs.