Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

Charles Courtemanche and Art Carden

No 17220, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Prior research shows grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers - Costco and Walmart-owned Sam's Club - are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This could be explained by a segmented-market model, or by incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam's Club entry affects grocery stores' prices, consistent with Sam's Club's focus on small businesses instead of consumers.

JEL-codes: L11 L13 L81 R10 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-com, nep-ind and nep-ure
Note: EH IO
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Citations: View citations in EconPapers (3)

Published as Charles Courtemanche & Art Carden, 2014. "Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices," Southern Economic Journal, Southern Economic Association, vol. 80(3), pages 565-585, January.

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Working Paper: Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices (2011)
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