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Supermarket responses to Wal-Mart Supercenter expansion: a structural approach

Rebecca Cleary (rcleary@colostate.edu) and Rigoberto Lopez

Empirical Economics, 2014, vol. 47, issue 3, 905-925

Abstract: The impact of Wal-Mart in lowering incumbents’ retail prices has been well documented by previous studies using reduced form models. This article uses a structural model to examine the pricing behavior and promotion responses of incumbent supermarkets to a rapid expansion of Wal-Mart Supercenters (WMS) using the Dallas–Fort Worth milk market as a case study. Empirical results verify that WMS expansion disciplines incumbent supermarkets by decreasing oligopoly power and numbing consumer responsiveness to promotion. In addition, WMS expansion lures away price-sensitive consumers, leaving incumbent supermarkets to face more price-inelastic but lower demands for milk. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Wal-Mart; Competition; Promotions (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00181-013-0767-5

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