The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry Into The Supermarket Industry

Michael Noel and Emek Basker
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Michael Noel: Department of Economics, University of California - San Diego

No 2007-03, University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: We analyze the effect of Wal-Mart's entry into the grocery market using a unique stor-level price panel data set. We use OLS and two IV specifications to estimate the effect of Wal-Mart's entry on competitors' prices of 24 grocery items across several categories. Wal-Mart's price advantage over competitors for these products averages approximately 10%. On average, competitors' response to Wal-Mart's entry is a price reduction of 1-1.2%, mostly due to smaller-scale competitors: the response of the "big three" supermarket chains (Alberson's, Safeway, and Kroger) is less than half that size. We confirm our results using a falsification exercises, in which we test for Wal-Mart's effect on prices of services that it does not provide, such as movie tickets and dry cleaning services.

Keywords: Wal-Mart; Retail Prices; Supermarkets; Price Competition (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-com, nep-mkt and nep-ure
Date: 2007-06-01
Note: oai:cdlib1:
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Related works:
Working Paper: The Evolving Food Chain: Competitive Effects of Wal-Marts Entry into the Supermarket Industry (2007)
Journal Article: The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry into the Supermarket Industry (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:cdl:ucsdec:2007-03

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