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

Emek Basker and Michael Noel

No 712, Working Papers from Department of Economics, University of Missouri

Abstract: We analyze the effect of Wal-Marts entry into the grocery market using a unique store-level price panel data set. We use OLS and two IV specifications to estimate the effect of Wal-Marts entry on competitors prices of 24 grocery items across several categories. Wal-Marts price advantage over competitors for these products averages approximately 10%. On average, competitors response to Wal-Marts entry is a price reduction of 11.2%, mostly due to smaller-scale competitors: the response of the big three supermarket chains (Albertsons, Safeway, and Kroger) is less than half that size. We confirm our results using a falsification exercises, in which we test for Wal-Marts 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)
JEL-codes: L11 L13 L81 (search for similar items in EconPapers)
Pages: 32 pgs.
Date: 2007-06-15
New Economics Papers: this item is included in nep-agr, nep-com, nep-mkt and nep-ure
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Citations: View citations in EconPapers (9)

Published in Journal of Economics and Management Strategy 2009

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Related works:
Journal Article: The Evolving Food Chain: Competitive Effects of Wal‐Mart's Entry into the Supermarket Industry (2009)
Working Paper: The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry Into The Supermarket Industry (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:0712

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