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Entry and Prices: Evidence from the Chilean Supermarket Industry

Author

Listed:
  • Loreto Lira
  • Rosario Rivero
  • Rodrigo Vergara

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

One of the most significant developments in the last couple of decades in the retail industry has been the emergence of large supermarkets (hypermarkets). The purpose of this paper is to investigate the effect on prices of the entry of a large supermarket into a given location. We use a panel with data from fifteen cities in Chile for the period 1998:I – 2004:IV. The dependent variable is the price of a bundle of 52 food products in each city relative to Santiago. We find that the entry of a hypermarket to a given city reduces prices in that local market by ten percent. Most interestingly, we also find that half of this effect takes place the year before the supermarket actually opens for business.

Suggested Citation

  • Loreto Lira & Rosario Rivero & Rodrigo Vergara, 2005. "Entry and Prices: Evidence from the Chilean Supermarket Industry," Documentos de Trabajo 299, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:299
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-299.pdf
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    References listed on IDEAS

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    1. Basker, Emek, 2005. "Selling a cheaper mousetrap: Wal-Mart's effect on retail prices," Journal of Urban Economics, Elsevier, vol. 58(2), pages 203-229, September.
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    Cited by:

    1. Rosario Rivero & Rodrigo Vergara, 2007. "Do large retailers affect employment? Evidence from an emerging economy," Applied Economics Letters, Taylor & Francis Journals, vol. 15(1), pages 65-68.
    2. Viego, Valentina, 2008. "Regulacion de la competencia inter-cpaitalista. El caso de los supermercados [Regulation of inter-capitalist competente. The case of supermarkets]," MPRA Paper 9566, University Library of Munich, Germany.
    3. Cristián Larroulet Vignau, 2016. "George Stigler and His Influence on the Transformation of the Chilean Economy," Serie Working Papers 44, Universidad del Desarrollo, School of Business and Economics.
    4. Francisco Rosende & Matías Tapia, 2006. "La Caída de la Inflación en Chile: Políticas, Instituciones y Suerte," Documentos de Trabajo 308, Instituto de Economia. Pontificia Universidad Católica de Chile..
    5. Fernando Borraz & Juan Dubra & Daniel Ferrés & Leandro Zipitría, 2009. "Supermarket Entry and its effect on small stores in Montevideo, 1998 to 2007," Documentos de trabajo 2009005, Banco Central del Uruguay.
    6. Viego, Valentina, 2008. "Impactos de las grandes superficies comerciales sobre el comercio tradicional y de las medidas regulatorias [Big retaling facilities´ impact on traditional retail and regulatory laws]," MPRA Paper 9567, University Library of Munich, Germany.

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    More about this item

    Keywords

    Entry; prices; retail;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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