The Competitive Effects of Entry: Evidence from Supercenter Expansion

Coupling weekly grocery transactions with the exact location and opening date of Walmarts over an 11-year period, we examine how Supercenter entry affects prices and revenues at incumbent supermarkets. We find that entry within 1 mile of an incumbent causes a sharp 16 percent drop in revenue, a comp...

Full description

Saved in:
Bibliographic Details
Published in:American economic journal. Applied economics 2020-07, Vol.12 (3), p.175-206
Main Authors: Arcidiacono, Peter, Ellickson, Paul B., Mela, Carl F., Singleton, John D.
Format: Article
Language:English
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Coupling weekly grocery transactions with the exact location and opening date of Walmarts over an 11-year period, we examine how Supercenter entry affects prices and revenues at incumbent supermarkets. We find that entry within 1 mile of an incumbent causes a sharp 16 percent drop in revenue, a competitive effect that decays quickly with distance. Surprisingly, despite large cross-sectional differences in supermarket prices by exposure to Walmart, our findings also indicate that Supercenter entry has no causal effect on incumbent prices. This result is robust across many dimensions, including a lack of price response for individual products, and across brands within a category.
ISSN:1945-7782
1945-7790
DOI:10.1257/app.20180047