Hump-shaped cross-price effects and the extensive margin in cross-border shopping
Working paper
Updated version
View/ Open
Date
2019-09-23Metadata
Show full item recordCollections
- Discussion papers (SAM) [662]
Abstract
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.