This dissertation consists of three chapters covering topics in empirical industrial organization. The first chapter considers how consumers respond to reductions in the net weight of packaged goods. The second chapter documents the use of pricing zones among US grocery retailers. Finally, the third chapter analyzes the market power of Visa credit
cards.
The first chapter examines how consumers respond to product downsizing where firms increase unit prices by reducing the content of their packaging. I consider whether consumers are inattentive to reductions in package content since they tend to underuse statements of net weight. I build a structural model of consumer preferences that incorporates inattention to changes in net weight and apply it to grocery store scanner data. I apply the model to a downsizing event in the black pepper industry where the industry’s largest firm shrunk five of its products. I show that approximately half of all consumers fail to notice the reductions. With full information, consumers would switch to larger packages that provide
greater welfare.
In the second chapter, Joseph Simmons and I document the extent of zone pricing among top grocery retailers. Using data from grocery and home improvement retailers, we develop a machine learning algorithm that identifies pricing zones from point of sale data. We apply our method to pricing data from some of the top grocery retailers. We find that these large grocery retailers price their products using a small number of zones. Moreover, the number of zones does not change over a nine-year period, despite significant improvements in information technology during this time. This suggests that an inability to distinguish demand across stores is the primary impediment to greater price discrimination.
The third chapter evaluates the market power of Visa credit cards by exploiting an event where the grocery retailer Kroger stopped accepting Visa credit cards at two of its grocery chains. I employ an event study methodology to examine how foot traffic changes at the beginning and end of the ban. I find that foot traffic decreases by six percent at the
start of the ban, implying that Visa has substantial market power. Because Kroger offered price discounts and other promotions during this time, my result may represent a lower bound on the true effect. However, the results are sensitive to violations in the identifying assumptions.
| Identifer | oai:union.ndltd.org:bu.edu/oai:open.bu.edu:2144/45305 |
| Date | 03 November 2022 |
| Creators | Meeker, Ian |
| Contributors | Rysman, Marc |
| Source Sets | Boston University |
| Language | en_US |
| Detected Language | English |
| Type | Thesis/Dissertation |
| Rights | Attribution 4.0 International, http://creativecommons.org/licenses/by/4.0/ |
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