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Hump-shaped cross-price effects and the extensive margin in cross-border shopping

Friberg, Richard; Steen, Frode; Ulsaker, Simen A.
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http://hdl.handle.net/11250/2625569
Utgivelsesdato
2019-09-23
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  • Discussion papers (SAM) [586]
Sammendrag
This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store×category sales data from Norway’s largest grocery chain 2011-2016. The sensitivity of demand to 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 `a 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.
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Institutt for samfunnsøkonomi
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DP SAM;20/2019

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