Sales and Firm Entry: The Case of Wal-Mart
AbstractTemporary price reductions or â€œsalesâ€ have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal-Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss-leader strategy.
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Bibliographic InfoPaper provided by Department of Economics, Colgate University in its series Working Papers with number 2012-03.
Date of creation: 2012
Date of revision:
Wal-Mart; Retail Prices; Price Competition; Temporary Sales Prices;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-10-20 (Agricultural Economics)
- NEP-ALL-2012-10-20 (All new papers)
- NEP-BEC-2012-10-20 (Business Economics)
- NEP-COM-2012-10-20 (Industrial Competition)
- NEP-MKT-2012-10-20 (Marketing)
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