Retail Economics

ECN432 Retail Economics

Autumn 2020

  • Topics

    Retail firms occupy a large share of the workforce, provide career opportunities and the functioning of retail markets are central to the economy affecting everything from inflation to consumer welfare from expanded choice. Retailing has undergone significant changes in terms of digitalization, technology and the vertical and horizontal structure during the last decades. From smaller independent units to larger chains, from a fragmented independent wholesale sector to concentrated chain-owned distribution, from national - to partly international ownership, to mention some of the major trends. The newest and most important change is the challenge met by traditional brick-and mortar stores from the new online stores.

    The course aims to give the students a better understanding of the functioning and the economic mechanisms that are important in the retail sector. We will combine theory and empirics, using real data from various retail sectors. The course will also introduce the students to key persons working in the sector through a number of guest lectures.

    The students will learn how to analyze data and problems using real data from the retail sector.

    A student that has taken this course should be able to start working in strategy- and analysis departments in major retail chains, having a skillset that includes a strategic understanding of retail markets and data analyst skills that can be used to handle datasets.

    Topics that will be covered include:

    The retail sector at large

    • The history of retailing in Norway
    • Technological development, productivity and innovation
    • From independent wholesalers to centralized distribution
    • The vertical structure of retailing
    • From Brick and mortar to Amazon
    • Horizontal organization and competition

    Pricing dynamics and demand

    • Pricing dynamics and algorithm pricing
    • How does new (sugar) tariffs affect pricing?
    • Fast moving consumer goods - price search and pricing obfuscation
    • Pricing and the business cycle
    • Demand when both quality and price matters
    • Demand for online goods
    • Self-Checkout: Does it change consumer behavior?

    Competition and local markets

    • Local market delineation in retail industries: Diversion ratios and price pressure tests
    • Cross border trade in grocery markets
    • Car retailing and competition
    • Competition in local pharmacy markets
    • Local market power in gasoline retailing
    • Asymmetric price responses in gasoline markets: Rockets and Feathers

    Some of the retail sectors discussed more in detail during the course:

    • Grocery
    • ‘Dollarstores’
    • Pharmacies
    • Gasoline
    • Cars
    • Online retail

  • Learning outcome

    Knowledge:

    • Detailed knowledge and facts on the retail sector and its functioning.
    • Knowledge on how to use economic theory to better understand retail markets.
    • Knowledge on how to use retail sector data to estimate pricing, demand and competition effects.

    Skills:

    • Use economic modelling to understand retail market dynamic.
    • Analyze and evaluate retail data using statistical tools.
    • Formulate and estimate simple dynamic pricing models.
    • Formulate and estimate simple demand models.
    • Formulate and estimate differentiated demand models.
    • Formulate and estimate competition models.

     

    General competence:

    • Understand how retail markets work and interpret these using economic theory and data.
    • Provide ethical justification for how to design and understand research on retail markets.

  • Teaching

    The major part of the teaching will take place in classes (15), but we also have three lab sessions during the course.

    We will have a number of guest lectures from key-industry people (3-4).

  • Required prerequisites

    BUS441 and methodology course from BUS or ECN in regression techniques.

  • Requirements for course approval

    Two mandatory assignments solved in groups (maximum three group members).

  • Assessment

    One four-day home exam solved in groups (maximum three group members), start Day 1 at 8.00, deadline Day 4 at 16.00.

    The exam must be written in English. 

  • Grading Scale

    A-F

  • Computer tools

    STATA

  • Literature

    Textbook and articles

Overview

ECTS Credits
7.5
Teaching language
English
Semester

Spring. Offered Spring 2021.

Course responsible

Course responsible: Professor Frode Steen, Department of Economics

Lecturers: Assistant Professor Simen A. Ulsaker and  Professor II Richard Friberg, Department of Economics