Market Competition And Metropolitan-Area Grocery Prices
AbstractThis paper examines the relationship of 1987 retail grocery prices to supermarket sales concentration across 95 U.S. metropolitan areas. The regression model incorporates a large number of population, retail-cost, and retail competition factors and separate prices by type of grocery item. We find that the concentration-price relationship is sensitive to item type: positive for packaged, branded, dry groceries and unrelated for produce, meat, and dairy product prices. As for market rivalry, we find that small grocery stores provide no grocery price competition for supermarkets. However, branded grocery prices are driven down by fast-food places and by rapid price churning, whereas for unbranded foods the presence of warehouse stores places downward pressure on supermarket prices while fast-food presence does not. For the branded-groceries component, we also find prices higher in large, fast-growing, low- income, Eastern cities. We also find that cities where rents, wages, and electricity costs are high tend to have high dry grocery prices. However, for the unbranded-products component retail costs are unrelated to prices, and cities in the South have the highest prices.
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Bibliographic InfoPaper provided by Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance in its series Working Papers with number 25988.
Date of creation: 1996
Date of revision:
retail grocery trade; pricing policy; variable price merchandising; market competition; category management; market structure; sales concentration; price discrimination; price rivalry; oligopoly; food demand; food prices; Consumer/Household Economics;
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