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.
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Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number
299.
Find related papers by 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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