Entry of Wal-Mart Supercenters and Supermarkets’ Profit Margins
Xiaoou Liu and
Rigoberto Lopez ()
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Xiaoou Liu: University of Connecticut
No 3, Working Papers from University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy
This article quantifies the impact of Wal-Mart Supercenters on supermarkets’ profitability via a two-stage dynamic entry game, using method of simulated moments and milk scanner data from Dallas/Fort Worth supermarkets. The empirical findings show that the entry of Wal-Mart Supercenters accounts for about an average 50% decrease in milk profit margins for incumbent supermarkets. Effects of scale are found to be more significant for Wal-Mart Supercenters than for incumbent supermarkets, granting Wal-Mart a competitive edge.
Keywords: Wal-Mart; entry; profit margins; milk; dynamic games (search for similar items in EconPapers)
JEL-codes: C73 D4 L1 L66 L81 (search for similar items in EconPapers)
Pages: 29 pages
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Working Paper: Entry of Wal-Mart Supercenters and Supermarkets’ Profit Margins (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zwi:wpaper:03
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