Rev Ind Organ (2007) 31:237–260
Entry and Prices: Evidence from the Supermarket
Loreto Lira · Rosario Rivero · Rodrigo Vergara
Published online: 22 February 2008
© Springer Science+Business Media, LLC. 2008
Abstract 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.
Keywords Entry · Prices · Retail
JEL Classiﬁcation L81 · L10 · L11
How the entry of new ﬁrms affects product prices in the retail sector is a subject that
has attracted little empirical analysis. Broadly speaking, existing work has focused on
barriers to entry and on the capacity of potential entrants.
See, for instance, Cotterill and Haller (1992).
Universidad de los Andes, San Carlos de Apoquindo 2200, Las Condes, Santiago, Chile
R. Rivero · R. Vergara (
Economics Department, Pontiﬁcia Universidad Católica de Chile, Av. Vicuña Mackenna 4860,