Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping
-
Richard Friberg
-
Frode Steen
-
Simen A. Ulsaker
- American Economic Journal: Microeconomics (Forthcoming)
Abstract
This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store X 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 à 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.
Forthcoming Article Downloads