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Stephane Caprice and Shiva Shekhar
''Negative market value and loss leading''
( 2019, Vol. 39 No.1 )
Multi-product retailers competing with smaller retailers can exercise market power by pricing below cost products also offered by smaller rivals. Loss-leading is not a predatory strategy: rather pro-competitive justifications are invoked. Unlike standard textbook models, we show that positive market value, that is, consumer valuation larger than production cost, is not required in this line of research examining the phenomenon of loss-leading. Multi-product retailers can supply products offering negative market value. We use this insight to revisit some classic issues in vertical relations.
Keywords: Multi-product retailers, loss-leading, negative market value
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Apr 09 2018 Manuscript Accepted : Jan 10 2019

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