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Incumbent's price response to new entry: The case of Japanese supermarkets

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Author Info

  • Abe, Naohito
  • Kawaguchi, Daiji

Abstract

Large-scale supermarkets have rapidly expanded in Japan over the past two decades, partly because of zoning deregulations for large-scale merchants. This study examines the effect of supermarket openings on the price of national-brand products sold at local incumbents, using scanner price data with a panel structure. Detailed geographic information on store location enables us to define treatment and control groups to control for unobserved heterogeneity and temporary demand shock. The analysis reveals that stores in the treatment group lowered their prices of curry paste, bottled tea, instant noodles, and toothpaste by 0.4-3.1% more than stores in a control group in response to a large-scale supermarket opening.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 24 (2010)
Issue (Month): 2 (June)
Pages: 196-212

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Handle: RePEc:eee:jjieco:v:24:y:2010:i:2:p:196-212

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Web page: http://www.elsevier.com/locate/inca/622903

Related research

Keywords: Competition Market structure Zoning regulation Pricing Retail industry Japan;

References

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  1. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  2. Jerry Hausman & Ephraim Leibtag, 2004. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Working Papers 10712, National Bureau of Economic Research, Inc.
  3. Jerry Hausman & Ephraim Leibtag, 2007. "Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal-Mart," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1157-1177.
  4. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
  5. Kenn Ariga & Kenji Matsui & Makoto Watanabe, 2001. "Hot and Spicy: Ups and Downs on the Price Floor and Ceiling at Japanese Supermarkets," Asia Pacific Economic Papers 316, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  6. Loreto Lira & Rosario Rivero & Rodrigo Vergara, 2007. "Entry and Prices: Evidence from the Supermarket Sector," Review of Industrial Organization, Springer, vol. 31(4), pages 237-260, December.
  7. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. MATSUURA Toshiyuki & SUGANO Saki, 2009. "The Effect of Relaxation of Entry Restrictions for Large-Scale Retailers on SME Performance: Evidence from Japanese Retail Census," Discussion papers 09054, Research Institute of Economy, Trade and Industry (RIETI).
  2. SHIMOTSU Katsumi, 2014. "The Effect of Large-Scale Retailers on Price Level: Evidence from Japanese data for 1977-1992," Discussion papers 14013, Research Institute of Economy, Trade and Industry (RIETI).
  3. Javier Campos & Juan Luis Jiménez & Ancor Suárez-Alemán, 2012. "“Not always sunny in paradise: prices and brand diversity in touristic areas supermarkets”," IREA Working Papers 201211, University of Barcelona, Research Institute of Applied Economics, revised May 2012.

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