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The Effect of Wal-Mart Supercenters on Grocery Prices in New England

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  • Volpe, Richard J., III
  • Lavoie, Nathalie

Abstract

This study examines the competitive price effect of Wal-Mart Supercenters on national brand and private label grocery prices in New England. For this purpose, we use primary price data collected on a basket of identical products from six Supercenters in Massachusetts, Connecticut, and Rhode Island as well as a sample of conventional supermarkets. Taking into account demographics, store characteristics, and market conditions, we estimate the average prices charged by (1) Supercenters, (2) supermarkets competing directly with Supercenters, and by (3) supermarkets geographically distant from Supercenters. By comparing prices at competing stores and at distant stores, we show that the effect of Wal-Mart Supercenters is to decrease prices by 6 to 7 percent for national brand goods and 3 to 7 percent for private label goods. Price decreases are most significant in the dry grocery and dairy departments. Moreover, Wal-Mart sets prices significantly lower than its competitors in the food industry.

Suggested Citation

  • Volpe, Richard J., III & Lavoie, Nathalie, 2006. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Working Paper Series 14515, University of Massachusetts, Amherst, Department of Resource Economics.
    • Handle: RePEc:ags:umamwp:14515
    DOI: 10.22004/ag.econ.14515
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    References listed on IDEAS

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    1. Zimmerman, Paul R., 2009. "The competitive impact of hypermarket retailers on gasoline prices," MPRA Paper 20248, University Library of Munich, Germany.

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