Multi-Stop Shopping and Multi-Purpose Shopping
[ABSTRACT] As there has been a huge shift in shopping patterns during the past few decades, a more realistic approach is required to consider consumers’ store choice behavior. In my attempt to better reflect the store choice behavior of consumers, I present a model that relaxes the two dimension space and time of a standard Hotelling model. First, I consider multi-stop shopping, which opens up the possibility that consumers can buy the product both firms. The fact that the multi-stop shoppers are part of a common demand for both firms mitigates the price competition, and this case becomes a special type of monopoly regime. As a results, the prices are strategic independent and the market heterogeneity is not equivalent to the market power, which sharply contrasts with the result of the single-stop model. Second, I consider multi-purpose shopping, which allows consumers to combine two shopping trips that are originally intended to be made at two separate periods-one today and another tomorrow. Following Winter (1993)’s study of two dimensional search, I adopt two parameters, the location and discount factor, which respectively determines the optimal number of stops and shopping purposes. The intuitive results hold true to confirm the following shopping patterns: the consumer with a higher discount factor is more likely to be the multi-purpose shopper, and the consumer located at a less convenient location is more likely to be a multi-purpose shopper.