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Price dispersion across U.S. cities: The role of Walmart

Md. Rafayet Alam and Akm Morshed

Economic Analysis and Policy, 2021, vol. 71, issue C, 227-237

Abstract: This study examines the effect of Walmart on price dispersion across US cities. Although US retail architecture has been changed over the past two decades by the expansion of big-box chain-stores such as Walmart, the impact of such market consolidation on price dispersion is not examined rigorously. Using opening/conversion dates of Walmart and good-specific quarterly retail prices for 101 US cities over 25 years, we examine the role of Walmart on price dispersion across US cities. Our analysis shows that price dispersion in a city-pair increases when Walmart enters one of the cities in the pair. When Walmart enters the other city of the city-pair, price dispersion falls from that increased level but the fall is not enough to bring the price dispersion back to the level where there is no Walmart in the city-pair. This finding implies that Walmart drives down prices in ‘early’ cities more than in ‘late’ cities and that prevalence of big-box stores may be one of the reasons for price dispersion across cities.

Keywords: Price dispersion; Walmart; US cities (search for similar items in EconPapers)
JEL-codes: R1 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.eap.2021.04.016

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