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Seemingly Competitive Food Retail Regulations: Who Do They Really Help?

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  • Bruno Larue
  • Olivier Bonroy

Abstract

The food distribution and retail sectors in Quebec are highly concentrated and integrated as large food distributors are also involved in food retailing. As such, they are competing with small grocery and convenience stores they sell inputs to. A review of the industry suggests that there are important economies of size in distribution, but that smaller stores offering convenience face a more inelastic demand. Concerns over the survival of smaller stores in Quebec have motivated two types of regulations. The first type aims at reducing the cost advantage of dominant retailers by restricting the number of employees that they are allowed to use during specific time periods. The second type restricts retail prices. We develop a simple model capturing the main features of the industry to ascertain the impact of these regulations on retail and wholesale prices. Our results suggest that these regulations reduce welfare and may induce both tighter margins and lower surplus for small retailers. Au Québec, les secteurs du commerce de détail et de la distribution des aliments sont fortement concentrés et intégrés puisque les grands distributeurs d’aliments sont aussi engagés dans le commerce de détail. À ce titre, ils font concurrence aux petites épiceries et aux dépanneurs qu’ils approvisionnent. Un examen de l’industrie autorise à penser qu’il existe d’importantes économies de taille dans le secteur de la distribution, mais que les petites épiceries de dépannage sont confrontées à une demande plus inélastique. Les inquiétudes entourant la survie des petites épiceries au Québec ont motivé deux types de règlements. Le premier vise à diminuer l’avantage de coût des détaillants dominants en limitant le nombre d’employés pendant certaines périodes spécifiques. Le deuxième vise à limiter les prix de détail. Nous avons élaboré un modèle simple qui renferme les principales caractéristiques de l’industrie pour évaluer les répercussions de ces règlements sur les prix de détail et de gros. Nos résultats portent à croire que ces règlements diminuent le bien‐être et peuvent entraîner un resserrement des marges et une diminution des surplus des petits détaillants.

Suggested Citation

  • Bruno Larue & Olivier Bonroy, 2009. "Seemingly Competitive Food Retail Regulations: Who Do They Really Help?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(3), pages 305-324, September.
  • Handle: RePEc:bla:canjag:v:57:y:2009:i:3:p:305-324
    DOI: 10.1111/j.1744-7976.2009.01153.x
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    Cited by:

    1. Lambert, Remy, 2012. "A Primer on the Economics of Supply Management and Food Supply Chains," Working Papers 125246, Structure and Performance of Agriculture and Agri-products Industry (SPAA).

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    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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