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 7: Retail forms and the provision of distribution services

Roger R. Betancourt


In this chapter we focus on retail forms and the distribution services that characterize them. In section 7.1 we present the main trends identified in the literature for food stores and interpret them in terms of the distinctions relevant to understand retail output developed in Chapter 4. This interpretation leads us to concentrate on the level of assortment as one of the main, if not the main, defining characteristic of modern supermarkets. Section 7.2 develops a model of assortment, inspired by the work of Messinger and Narasimhan (1997), to analyse intertype competition. This model also provides an alternative way of capturing this type of competition to the one used in the model of the previous chapter. Section 7.3 shows how this model indeed collapses to the one actually estimated by Messinger and Narasimhan and discusses the econometric evidence provided by these authors on the choice of assortment by supermarkets. Section 7.4 develops a model along the lines of those considered in Chapter 6 to analyse the choice of assortment by retailers in a setting of spatial competition. This model was inspired by the work of Bhatnagar and Ratchford (2000). It generalizes the model of section 7.2, by allowing location to vary in equilibrium, and it generalizes Bhatnagar and Ratchford (2000), by allowing for imperfect competition, general functional forms and varying levels of market demand. Generality is bought at the price of lack of differentiation between depth and breadth of assortment. This difference and its implications for the classification of retail...

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