Document Type
Discussion Paper
Publication Date
2-1-2017
CFDP Number
2079
CFDP Pages
44
Abstract
We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. The use of zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing discrimination does.
Recommended Citation
Adams, Brian and Williams, Kevin R., "Zone Pricing in Retail Oligopoly" (2017). Cowles Foundation Discussion Papers. 2553.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2553