Managing price expectations through product overlap

How should a retailer think about the decision to carry, price, and promote products that overlap with another store when such overlap is predicted to intensify price competition and drive down product prices? The existing research suggests that retailers should look to carry an ever-increasing percentage of unique or non-overlapping products J. Marketing 61 (1997) 38; Marketing Sci. 19 (2000) 83], thereby eliminating the ability to compare prices across stores.We challenge this recommendation, arguing that overlapping products allow one type of retailer—the higher end retailer—to signal the fairness of its prices and foster a more favorable price image than might otherwise exist. In a laboratory study, we show that, for higher end stores, the existence of overlapping products can significantly increase perceptions of pricing fairness and subsequent store choice, even when those overlapping products are no cheaper in the focal store than in a competing store.