This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store × category sales data from Norway's largest grocery chain 2012–2016. The sensitivity of demand to the foreign price is hump-shaped and greatest 30–60 minutes' driving distance from the closest foreign store. Combining continuous demand, fixed costs of cross-border shopping, and linear transport costs a la Hotelling, we show how this hump shape can arise through a combination of intensive and extensive margins of cross-border shopping. Our conclusions are further supported by novel survey evidence and cross-border traffic data.
Friberg, Richard, Frode Steen, and Simen A. Ulsaker.
"Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping."
American Economic Journal: Microeconomics,
Consumer Economics: Empirical Analysis
Production, Pricing, and Market Structure; Size Distribution of Firms
Retail and Wholesale Trade; e-Commerce