Working Paper: CEPR ID: DP13650
Authors: Frode Steen; Richard Friberg; Simen A. Ulsaker
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.
Keywords: crossborder shopping; competition in grocery markets; product differentiation
JEL Codes: F15; H73; L66; R20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cross-border shopping (F55) | grocery demand sensitivity (R22) |
| distance from the border (F55) | grocery demand sensitivity (R22) |
| relative prices (P22) | grocery demand (R22) |
| exchange rate (F31) | relative prices (P22) |