Affiliation:
1. Department of Economics KU Leuven Leuven Belgium
2. Department of Applied Economics, Erasmus School of Economics Erasmus University Rotterdam Rotterdam The Netherlands
Abstract
AbstractHow do firms compete when all firms in an industry set identical prices? Using Nielsen data on India's biscuit manufacturers, we document productivity‐based competition on nonprice strategies under industry‐wide uniform pricing. Products with one standard deviation higher quantity‐based productivity contain, on average, 13% more quantity per pack for the same price. Productivity also positively correlates with promotions on pack size, availability, and variety. A higher price (per pack size) sensitivity in rural markets combined with industry‐wide uniform pricing imposes a greater burden on rural consumers. Additional analyses show that firms can reduce this burden by selling different pack sizes in urban and rural areas.
Subject
Management of Technology and Innovation,Strategy and Management,Economics and Econometrics,General Business, Management and Accounting,Colloid and Surface Chemistry,Physical and Theoretical Chemistry