Working Paper: CEPR ID: DP16784
Authors: Kate Rockett; Jean-Marie Cardebat; Olivier Gergaud; Pierre Regibeau
Abstract: We investigate price dispersion in restaurant sales of wine. We measure empirically the change in price dispersion as competition varies, finding that price dispersion increases with competition. We then propose a spatial model capturing the unique features of restaurant dining to explain this empirical regularity. The model reveals an indirect effect flowing through the price of food, which is announced and known by customers, to the price of wine, which is only revealed once the customer enters the restaurant and receives the wine list. The results add to the literature on “add ons” and price dispersion in bundled good markets.
Keywords: price dispersion; wine; restaurant; spatial competition
JEL Codes: L13; L90; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| competition (L13) | price dispersion (L11) |
| restaurant density (R30) | price dispersion (L11) |
| food prices (Q11) | wine prices (L66) |
| competition (L13) | food prices (Q11) |
| price dispersion (L11) | wine prices (L66) |