The Economics of Retailing and Distribution
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The Economics of Retailing and Distribution

Roger R. Betancourt

This book provides a uniform and coherent approach to the analysis of distribution systems in general and retail systems in particular. It develops the fundamentals of retail demand and supply, and demonstrates how the provision of distribution services is a principal determinant of economic outcomes in retail exchanges for both retailers and their customers, as well as for other agents such as suppliers and franchisors.
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Chapter 6: Is Packaging Service Provision or Price Discrimination? 7. Retail Forms and the Provision of Distribution Services

Roger R. Betancourt


6. Is packaging service provision or price discrimination? In this chapter I analyse a retail business practice that has as an important feature, perhaps as its most important one, the shifting of distribution costs across market boundaries: namely, packaging. This feature of packaging is usually absent from the modern literature on the topic. This literature focuses on the price discrimination aspects of packaging. I will use this introduction to embed the topic of packaging in the broader price discrimination setting to which it belongs, but I will devote most of the rest of the chapter to bring out the consequences of its being a mechanism for providing different levels of distribution services through the shifting of distribution costs across market boundaries. Whenever one observes more than one package of the same item available, one enters the world of commodity bundling. It is, thus, useful to start by relating this type of bundling to the bundling discussed in Chapter 2. There we identified two types of bundling as fundamental characteristics of retail markets: the bundling of distribution services with the items or services explicitly sold at retail, and the bundling of distribution services among themselves. Packaging of items explicitly sold at retail into a small and a large package, for example, can be viewed as a third type of bundling, which the literature refers to as commodity bundling, or it can be viewed in terms of one of the two types of bundling described as fundamental characteristics of retail markets in...

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