Paul W. Dobson and Michael Waterson

Chain-stores now dominate most areas of retailing. While retailers may operate nationally or even internationally, the markets they compete in are largely local. How should they best operate pricing policy in respect of the different markets served—price uniformly across the local markets or on a local basis according to market conditions? We model this by allowing local market differences, with retail markets differing by their size and the number of players present. We show that practising price discrimination is not always best for a chain-store. Competitive conditions exist under which uniform pricing can raise profits.