Applied Seminar 
Time: 12:15 pm – 13:30 pm
Date: 30th of January
Room : 3001

Alina Ozhegova (Norwegian School of Economics) “Assortment Choice and Market Power under Uniform Pricing”

Abstract :This paper studies how retailers strategically use product assortment to respond tolocal market conditions when prices are set at the national level. When firms cannotincrease the price of a product that is particularly popular in a local market, theycan instead replace the product with a more expensive substitute. The profitabilityof these assortment substitutions depends on the degree of market competition. Thisstudy uses extensive receipt and store-level data and a structural equilibrium model todistinguish the impact of market power on assortment choice from other market forces,such as logistics costs. The findings confirm that firms make use of assortment choices,offering fewer and pricier products in markets with stronger local market power. I showthat a uniform assortment would benefit consumers but would reduce firm profits.Counterfactual policy experiments reveal that government intervention can improvetotal market welfare through subsidies to consumers or retailers in remote areas

Organizer: Marie-Laure ALLAIN