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Competition and Product Quality in the Supermarket Industry

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  • David A. Matsa
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    Abstract

    This article analyzes the effect of competition on a supermarket firm's incentive to provide product quality. In the supermarket industry, product availability is an important measure of quality. Using U.S. Consumer Price Index microdata to track inventory shortfalls, I find that stores facing more intense competition have fewer shortfalls. Competition from Walmart--the most significant shock to industry market structure in half a century--decreased shortfalls among large chains by about a third. The risk that customers will switch stores appears to provide competitors with a strong incentive to invest in product quality. Copyright 2011, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/qje/qjr031
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    Bibliographic Info

    Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

    Volume (Year): 126 (2011)
    Issue (Month): 3 ()
    Pages: 1539-1591

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    Handle: RePEc:oup:qjecon:v:126:y:2011:i:3:p:1539-1591

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    Cited by:
    1. Emek Basker, 2012. "Raising the Barcode Scanner: Technology and Productivity in the Retail Sector," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 1-27, July.
    2. Daniel Bennett & Wesley Yin, 2014. "The Market for High-Quality Medicine," NBER Working Papers 20091, National Bureau of Economic Research, Inc.
    3. Bart J. Bronnenberg & Jean-Pierre Dubé & Matthew Gentzkow & Jesse M. Shapiro, 2014. "Do Pharmacists Buy Bayer? Informed Shoppers and the Brand Premium," NBER Working Papers 20295, National Bureau of Economic Research, Inc.
    4. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2014. "Horizontal Mergers and Product Quality," NIPE Working Papers 07/2014, NIPE - Universidade do Minho.
    5. Sungwon Lee & Young Lee, 2014. "Stochastic frontier models with threshold efficiency," Journal of Productivity Analysis, Springer, vol. 42(1), pages 45-54, August.
    6. Hyunseung Oh & Nicolas Crouzet, 2013. "Can news shocks account for the business-cycle dynamics of inventories?," 2013 Meeting Papers 504, Society for Economic Dynamics.
    7. Victor Manuel Bennett & Lamar Pierce & Jason A. Snyder & Michael W. Toffel, 2012. "Competition and Illicit Quality," Harvard Business School Working Papers 12-071, Harvard Business School, revised May 2012.
    8. Ellickson, Paul B. & Grieco, Paul L.E., 2013. "Wal-Mart and the geography of grocery retailing," Journal of Urban Economics, Elsevier, vol. 75(C), pages 1-14.
    9. Itai Ater & Eugene Orlov, 2013. "The Effect of the Internet on Performance and Quality: Evidence from the Airline Industry," Working Papers 13-07, NET Institute.
    10. Emek Basker, 2013. "Change at the Checkout: Tracing the Impact of a Process Innovation," Working Papers 1302, Department of Economics, University of Missouri.

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