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An Estimable Model of Supermarket Behavior: Prices, Distribution - econ umd

An Estimable Model of Supermarket Behavior: Prices, Distribution - econ umd 2025

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The document presents a model of supermarket behavior that incorporates distribution services as a key factor influencing demand for products. It highlights the importance of these services, showing that a 1% increase in distribution services can lead to a 0.4% increase in quantity demanded. The analysis reveals that supermarkets experience constant marginal costs with respect to output but declining marginal costs concerning distribution services, indicating economies of scale. Additionally, it discusses how competition affects pricing and service choices, suggesting that supermarkets adopting newer formats and technologies enhance consumer welfare compared to traditional formats.

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