The purpose of this paper is to investigate the effect on prices of the entry of a large supermarket into a given location. We use a panel with data from fifteen cities in Chile for the period 1998:I–2004:IV. We correct for the potential simultaneity problem derived from the fact that entry can be a response to price differentials. We find that the entry of a hypermarket to a given city reduces relative prices in that local market by 7–11%. Most interestingly, we also find that part of this effect takes place the year before the supermarket actually opens for business.
Review of Industrial Organization – Springer Journals
Published: Feb 22, 2008
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