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Sales and Firm Entry: The Case of Wal-Mart

Philip Glandon () and Matthew Jaremski

No 2012-03, Working Papers from Department of Economics, Colgate University

Abstract: Temporary price reductions or "sales" have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal-Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss-leader strategy.

Keywords: Wal-Mart; Retail Prices; Price Competition; Temporary Sales Prices (search for similar items in EconPapers)
JEL-codes: E30 L11 L13 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-agr, nep-bec, nep-com and nep-mkt
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Journal Article: Sales and Firm Entry: The Case of Wal‐Mart (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cgt:wpaper:2012-03

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