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Spatial Price Equilibrium with Product Variety, Chain Stores, and Integer Pricing: An Empirical Analysis

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  • Robin Lindsey
  • Balder von Hohenbalken
  • Douglas S. West

Abstract

A spatial model that incorporates store locations and city topographic features is developed for the Edmonton, Alberta, video-cassette-rental market. Bertrand-Nash equilibrium prices are computed using a grid search algorithm that maximizes goodness-of-fit against observed prices. The fit is improved by taking into account differences between stores in product variety, the tendency of chains to set a common price for all member stores, and the tendency of chains to set whole dollar prices. Implications for further empirical research in spatial pricing are drawn.

Suggested Citation

  • Robin Lindsey & Balder von Hohenbalken & Douglas S. West, 1991. "Spatial Price Equilibrium with Product Variety, Chain Stores, and Integer Pricing: An Empirical Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 24(4), pages 900-922, November.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:4:p:900-922
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    Cited by:

    1. Eckert, Andrew & West, Douglas S., 2005. "Price uniformity and competition in a retail gasoline market," Journal of Economic Behavior & Organization, Elsevier, vol. 56(2), pages 219-237, February.

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