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The Competitive Effects of Entry: Evidence from Supercenter Expansion

Peter Arcidiacono, Paul B. Ellickson, Carl F. Mela and John Singleton

American Economic Journal: Applied Economics, 2020, vol. 12, issue 3, 175-206

Abstract: Coupling weekly grocery transactions with the exact location and opening date of Walmarts over an 11-year period, we examine how Supercenter entry affects prices and revenues at incumbent supermarkets. We find that entry within 1 mile of an incumbent causes a sharp 16 percent drop in revenue, a competitive effect that decays quickly with distance. Surprisingly, despite large cross-sectional differences in supermarket prices by exposure to Walmart, our findings also indicate that Supercenter entry has no causal effect on incumbent prices. This result is robust across many dimensions, including a lack of price response for individual products, and across brands within a category.

JEL-codes: D22 L81 R32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (25)

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DOI: 10.1257/app.20180047

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American Economic Journal: Applied Economics is currently edited by Alexandre Mas

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Handle: RePEc:aea:aejapp:v:12:y:2020:i:3:p:175-206