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Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

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  • Charles Courtemanche

    ()
    (Department of Economics, Andrew Young School of Policy Studies, Georgia State University, P.O. Box 3992, Atlanta GA 30302-3992, USA; corresponding author)

  • Art Carden

    ()
    (Department of Economics, Finance, and Quantitative Analysis, Brock School of Business, Samford University, 800 Lakeshore Drive, Birmingham AL 35226, USA;)

Abstract

Prior research shows that grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big-box retailers—Costco and Walmart-owned Sam's Club—are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along nonprice dimensions, such as product quality or quality of the shopping experience. We find no evidence that Sam's Club entry affects grocery stores' prices, consistent with Sam's Club's focus on small businesses instead of consumers.

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File URL: http://dx.doi.org/10.4284/0038-4038-2012.135
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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 80 (2014)
Issue (Month): 3 (January)
Pages: 565-585

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Handle: RePEc:sej:ancoec:v:80:3:y:2014:p:565-585

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  1. Art Carden & Charles Courtemanche & Jeremy Meiners, 2009. "Does Wal-Mart reduce social capital?," Public Choice, Springer, Springer, vol. 138(1), pages 109-136, January.
  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, 2005. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart," NBER Working Papers 11809, National Bureau of Economic Research, Inc.
  4. Noel, Michael & Basker, Emek, 2007. "The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry Into The Supermarket Industry," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt4nq8d4sm, Department of Economics, UC San Diego.
  5. Neumark, David & Zhang, Junfu & Ciccarella, Stephen, 2008. "The effects of Wal-Mart on local labor markets," Journal of Urban Economics, Elsevier, vol. 63(2), pages 405-430, March.
  6. Stephan J. Goetz & Anil Rupasingha, 2006. "Wal-Mart and Social Capital," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 88(5), pages 1304-1310.
  7. Ellickson, Paul B., 2006. "Quality competition in retailing: A structural analysis," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(3), pages 521-540, May.
  8. Dube, Arindrajit & Lester, T. William & Eidlin, Barry, 2007. "Firm Entry and Wages: Impact of Wal-Mart Growth on Earnings Throughout the Retail Sector," Institute for Research on Labor and Employment, Working Paper Series, Institute of Industrial Relations, UC Berkeley qt22s5k4pv, Institute of Industrial Relations, UC Berkeley.
  9. Courtemanche, Charles & Carden, Art, 2011. "Supersizing supercenters? The impact of Walmart Supercenters on body mass index and obesity," Journal of Urban Economics, Elsevier, vol. 69(2), pages 165-181, March.
  10. Emek Basker, 2004. "Selling a Cheaper Mousetrap: Wal-Marts Effect on Retail Prices," Working Papers, Department of Economics, University of Missouri 0401, Department of Economics, University of Missouri, revised 16 Mar 2004.
  11. Richard J. Volpe & Nathalie Lavoie, 2008. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Review of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 30(1), pages 4-26.
  12. Emek Basker, 2002. "Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion," Working Papers, Department of Economics, University of Missouri 0215, Department of Economics, University of Missouri, revised 14 Jan 2004.
  13. Art Carden & Charles Courtemanche, 2009. "Wal-Mart, Leisure, And Culture," Contemporary Economic Policy, Western Economic Association International, Western Economic Association International, vol. 27(4), pages 450-461, October.
  14. Russell S. Sobel & Andrea M Dean, 2008. "Has Wal-Mart Buried Mom And Pop?: The Impact Of Wal-Mart On Self-Employment And Small Establishments In The United States," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 46(4), pages 676-695, October.
  15. Ellickson, Paul, 2005. "Does Sutton Apply to Supermarkets?," Working Papers, Duke University, Department of Economics 05-05, Duke University, Department of Economics.
  16. Emek Basker, 2007. "When Good Instruments Go Bad," Working Papers, Department of Economics, University of Missouri 0706, Department of Economics, University of Missouri.
  17. Paul B. Ellickson, 2007. "Does Sutton apply to supermarkets?," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 38(1), pages 43-59, 03.
  18. Carden, Art & Courtemanche, Charles & Meiners, Jeremy, 2008. "Painting the Town Red? Wal-Mart and Values," Working Papers 09-5, University of North Carolina at Greensboro, Department of Economics, revised 01 Apr 2009.
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Cited by:
  1. Emek Basker, 2013. "Change at the Checkout: Tracing the Impact of a Process Innovation," Working Papers, Department of Economics, University of Missouri 1302, Department of Economics, University of Missouri.

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