Advanced Search
MyIDEAS: Login

Do prices fall faster when Wal-Mart is around? The effect of competition and reputation on cost pass-through and price adjustment

Contents:

Author Info

  • Martens, M. Andrea
Registered author(s):

    Abstract

    This study analyzes Wal-Mart’s pricing practices and its influence on competitors’ input cost transmission. Previous attempts to analyze Wal-Mart’s pricing strategy in the United States have been limited by the company’s refusal to provide scanner data to third party research firms such as AC Nielsen. This is the first study to observe Wal-Mart’s prices over an extended period of time. Using weekly-store level price data between 2001 and 2006 that government officials collected in 12 Mexican cities, I find that Wal-Mart adjusts its prices 1/3-3 times slower to wholesale price increases than other retailers and responds 5-7 times faster to wholesale price decreases than its competitors. This evidence is robust to the comparison of Wal-Mart to other hypermarkets that offer “every day low prices” and to potential endogeneity of Wal-Mart’s location choices. All retailers respond asymmetrically to wholesale cost changes. However, retailers other than Wal-Mart respond twice as fast to wholesale price increases than to decreases, while Wal-Mart behaves in the opposite way. I find no evidence that proximity to a Wal-Mart supercenter or the level of competition affects the speed of price adjustment of retailers.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://purl.umn.edu/49459
    Download Restriction: no

    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49459.

    as in new window
    Length:
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:ags:aaea09:49459

    Contact details of provider:
    Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
    Phone: (414) 918-3190
    Fax: (414) 276-3349
    Email:
    Web page: http://www.aaea.org
    More information through EDIRC

    Related research

    Keywords: Wal-Mart; cost pass-through; competition; Agribusiness; Industrial Organization;

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ags:aaea09:49459. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.