Entry and Prices: Evidence from the Supermarket Sector

Entry and Prices: Evidence from the Supermarket Sector 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Entry and Prices: Evidence from the Supermarket Sector

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Publisher
Springer US
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-008-9156-1
Publisher site
See Article on Publisher Site

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.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Feb 22, 2008

References

  • Strategic response of incumbents to new entry: The effect of ownership structure, capital structure and focus
    Khanna, N.; Tice, S.

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