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Demand complementarities, household production, and retail assortments

Author: Gautschi, David A. ; Betancourt, RogerINSEAD Area: MarketingIn: Marketing Science, vol. 9, no. 2, spring 1990 Language: EnglishDescription: p. 146-161.Type of document: INSEAD ArticleNote: Please ask the Library for this articleAbstract: This paper presents a formal model of retail demand based upon a household production framework which permits rigorous analysis of retail assortments. The model captures the essential shifting of distribution costs between retailers and consumers which manifests itself in retailers' provision of distribution services for consumers. The model is applied to define rigorously conventional retailing concepts, such as assortment breadth and depth, and to explain the appearance of certain well-known phenomena, such as leader pricing, non-price retail competition and the incentives for retail agglomerations to form. The paper concludes with some suggestions for future empirical work
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This paper presents a formal model of retail demand based upon a household production framework which permits rigorous analysis of retail assortments. The model captures the essential shifting of distribution costs between retailers and consumers which manifests itself in retailers' provision of distribution services for consumers. The model is applied to define rigorously conventional retailing concepts, such as assortment breadth and depth, and to explain the appearance of certain well-known phenomena, such as leader pricing, non-price retail competition and the incentives for retail agglomerations to form. The paper concludes with some suggestions for future empirical work

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