Retail pricing Groceries Order Price competition Laissez faire Loss leading
Economic & Social Research Institute
Walsh, Patrick Paul; Whelan, Ciara. 'A rationale for repealing the 1987 Groceries Order'. - Economic & Social Review, Vol. 30, No. 1, January, 1999, pp. 71-90, Dublin: Economic & Social Research Institute
A ban on pricing below cost was implemented under the 1987 Groceries Order based on
the premise that loss leading used in multi-product retail pricing distorts competition and exploits consumers in the short run, while driving a more concentrated structure and reducing welfare in the long run. Loss leading is examined for multi-product retailers selling in imperfectly competitive market niches with imperfect consumer information. We develop a theoretical argument in a simple two-stage framework that illustrates how loss leading on a subset of products is an equilibrium outcome of price competition that leaves overall welfare equal to that observed under laissez faire.
Please note: There is a known bug in some browsers that causes an
error when a user tries to view large pdf file within the browser window.
If you receive the message "The file is damaged and could not be
repaired", please try one of the solutions linked below based on the
browser you are using.
Items in TARA are protected by copyright, with all rights reserved, unless otherwise indicated.