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The Effect of Wal-Mart Supercenters on Grocery Prices in New England

Richard Volpe () and Nathalie Lavoie ()
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Nathalie Lavoie: Department of Resource Economics, University of Massachusetts Amherst

No 2006-8, Working Papers from University of Massachusetts Amherst, Department of Resource Economics

Abstract: This study examines the competitive price effect of Wal-Mart Supercenters on national brand and private label grocery prices in New England. For this purpose, we use primary price data collected on a basket of identical products from six Supercenters in Massachusetts, Connecticut, and Rhode Island as well as a sample of conventional supermarkets. Taking into account demographics, store characteristics, and market conditions, we estimate the average prices charged by (1) Supercenters, (2) supermarkets competing directly with Supercenters, and by (3) supermarkets geographically distant from Supercenters. By comparing prices at competing stores and at distant stores, we show that the effect of Wal-Mart Supercenters is to decrease prices by 6 to 7 percent for national brand goods and 3 to 7 percent for private label goods. Price decreases are most significant in the dry grocery and dairy departments. Moreover, Wal-Mart sets prices significantly lower than its competitors in the food industry.

Keywords: Wal-Mart; Supermarket Competition; Grocery Prices; National Brands, Private Labels (search for similar items in EconPapers)
JEL-codes: D21 D43 L11 L13 L81 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2006-10
New Economics Papers: this item is included in nep-agr, nep-com, nep-mic, nep-mkt and nep-ure
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Journal Article: The Effect of Wal-Mart Supercenters on Grocery Prices in New England (2008) Downloads
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