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Spatial competition in the French supermarket industry

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  • Stéphane Turolla

Abstract

This paper challenges the conventional wisdom on the competitive grocery retail sector in France. To that end, I develop a structural model of spatial competition that accounts for (i) market geography on consumers' preferences, and (ii) differences in their shopping list. The demand estimates are used to recover stores' price-cost margin under alternative pricing strategies. I select the best pricing model by applying non-nested tests and show that retailers noticeably distort their offer in highly concentrated markets. Finally, I perform counterfactual experiments to quantify the expected gain of an additional store on consumer welfare and retail prices.

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File URL: http://www.rennes.inra.fr/smart/Media/Working-papers/WP12-01
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Bibliographic Info

Paper provided by INRA UMR SMART in its series Working Papers SMART - LERECO with number 12-01.

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Length: 45 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:rae:wpaper:201201

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Web page: http://www.rennes.inra.fr/smart_eng/Working-Papers-SMART-LERECO
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Related research

Keywords: spatial competition; structural model; discrete choice model; differentiated products; supermarket industry;

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References

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  1. Marie-Laure Allain & Claire Chambolle, 2007. "Anti-Competitive Effects of Resale-Below-Cost Laws," Working Papers 2007-29, Centre de Recherche en Economie et Statistique.
  2. Allain, Marie-Laure & Chambolle, Claire & Vergé, Thibaud, 2008. "La Loi Galland sur les relations commerciales : jusqu'où les réformer ?," Opuscules du CEPREMAP, CEPREMAP, number 13, May.
  3. Ellickson, Paul & Misra, Sanjog, 2006. "Supermarket Pricing Strategies," Working Papers 06-02, Duke University, Department of Economics.
  4. Timothy J. Richards & Stephen F. Hamilton, 2006. "Rivalry in Price and Variety among Supermarket Retailers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 710-726.
  5. Michael A. Cohen & Ronald W. Cotterill, 2011. "Assessing The Impact Of Retailer Store Brand Presence On Manufacturer Brands In An Equilibrium Framework," Journal of Industrial Economics, Wiley Blackwell, vol. 59(3), pages 372-395, 09.
  6. Bonnet, Céline & Dubois, Pierre, 2008. "Inference on Vertical Contracts between Manufacturers and Retailers Allowing for Non Linear Pricing and Resale Price Maintenance," CEPR Discussion Papers 6918, C.E.P.R. Discussion Papers.
  7. Asplund, Marcus & Friberg, Richard, 2002. " Food Prices and Market Structure in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 547-66, December.
  8. Dubois, Pierre & Jodar-Rosell, Sandra, 2010. "Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model," TSE Working Papers 10-159, Toulouse School of Economics (TSE).
  9. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
  10. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
  11. Barros, Pedro Pita & Brito, Duarte & de Lucena, Diogo, 2006. "Mergers in the food retailing sector: An empirical investigation," European Economic Review, Elsevier, vol. 50(2), pages 447-468, February.
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Citations

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Cited by:
  1. Marie-Laure Allain & Claire Chambolle & Stéphane Turolla & Sofia B. Villas-Boas, 2013. "The Impact of Retail Mergers on Food Prices : Evidence from France," Working Papers 2013-18, Centre de Recherche en Economie et Statistique.
  2. Marie-Laure Allain & Claire Chambolle & Stéphane Turolla & Sofia Villas-Boas, 2013. "The impact of retail mergers on food prices: evidence from France," Working Papers 181943, Institut National de la Recherche Agronomique, France.

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