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A rationale for repealing the 1987 Groceries Order
Whelan, Ciara; Walsh, Patrick P.
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.
Keyword(s): Grocery trade--Law and legislation; Price regulation--Ireland; Loss leaders--Ireland
Publication Date:
Type: Journal article
Peer-Reviewed: Unknown
Language(s): English
Institution: University College Dublin
Publisher(s): Economic and Social Research Institute (ESRI)
File Format(s): other; application/pdf
First Indexed: 2012-08-25 05:25:14 Last Updated: 2018-10-11 16:35:51