The Role of the Retail Trade in the Competitive System

  • Pinhas Zusman
Part of the International Economic Association Series book series (IEA)


The importance of retail distribution in the price-formation process needs little elaboration. Pricing at the retail level affects, directly, wholesale and consumer prices and, indirectly, price relationships in other sectors of the economy.


Profit Margin Retail Price Retail Store Retail Trade Wholesale Prex 
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  1. 2.
    J. S. Bain, Industrial Organization, New York, 1959, p. 443.Google Scholar
  2. 1.
    R. B. Hefblower ‘Mass Distribution: A Phase of Bilateral Oligopoly or of Competition?’ American Economic Review, 1957, pp. 274–285.Google Scholar
  3. 2.
    See, e.g., J. Aubert-Krier, ‘Monopolistic and Imperfect Competition in Retail Trade’, in E. H. Chamberlin, Monopoly and Competition and their Regulation, London, 1954;Google Scholar
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    E. H. Chamberlin, The Theory of Monopolistic Competition, 7th Edn., Cambridge, Mass., 1956.Google Scholar
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    See T. Scitovsky, Welfare and Competition, Chicago, Ill., 1951, chap. xiii.Google Scholar
  8. 1.
    By analogy with Losch’s ‘Law of Marketing Area ‘, one expects the network of trading areas to consist of regular hexagonals, with the stores located at the centres. In this case K = 3.464. (See A. Losch, The Economics of Location, New Haven, Conn., 1954.)Google Scholar
  9. Since the actual value of K is not important, it is not specified in the present analysis. Equation (5) is an exact relation only when P = P0 and a =a0. Otherwise, the boundary lines are hyperbolic. See W. Isard, Location and Space-Economy, New York, 1956, p. 146. Since the present analysis deals with variation in the neighbourhood of a = a0 and P = P0, relation (5) is a sufficiently good approximation.Google Scholar
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    A bibliography and a short review of empirical cost studies in retail distribution is found in S. C. Hollander, ‘Theoretical Implications of Empirical Research on Retail Pricing’, American Economic Review (1957), pp. 252–265.Google Scholar
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    B. S. Yamey, ‘The Origin of Resale Price Maintenance: A Study of Three Branches of Retail Trade’, Economic Journal, 1952, pp. 522–545.Google Scholar
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    A thorough discussion of the more general role of information is found in G. J. Stigler, ‘The Economics of Information’, Journal of Political Economy, 1961, pp. 213–225.Google Scholar
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    Several authors have dealt with the general problem of price and output determination in a firm selling products with related demands and costs. Holton investigated these relations in retail pricing; R. H. Holton, ‘Price Discrimination at Retail: The Supermarket Case’, Journal of Industrial Economics, 1957, The most comprehensive treatment is due to Holdren, who investigated the behaviour of supermarkets.Google Scholar
  14. (Holdren, op, cit,) Additional contributions to the multi-product theory of retail pricing have been made by L. E. Preston: ‘Markups, Leaders and Discrimination in Retail Pricing’, Journal of Farm Economics, 1962, pp. 291–306. The present analysis draws considerably upon Holdren’s work.Google Scholar
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    E. W. Clemens, ‘Price Discrimination and the Multi-product Firm’, Review of Economic Studies, 1951–52. Reprinted in Readings in Industrial Organization and Public Policy, I, Homewood, 1958, pp. 262–276 and Holton, op. cit.Google Scholar

Copyright information

© International Economic Association 1966

Authors and Affiliations

  • Pinhas Zusman
    • 1
  1. 1.The Hebrew University of JerusalemIsrael

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