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Price and promotion effects of supermarket mergers

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Author Info

  • Davis, David E.

    ()
    (Department of Economics, South Dakota State University)

Abstract

I use a unique data set of retail food prices to analyze mergers between supermarket chains. The data allow for an examination of the effects of mergers on prices, the frequency of promotions, and the depth of promotions. I find that increases in a chain’s share of the total US food sales are associated with price decreases, suggesting that supermarkets enjoy economies of scale and/or benefit from an improved bargaining position relative to their suppliers after a merger. I also find that mergers are associated with decreases in the frequency and depth of price-promotions.

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File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/SupermarketmergersSept09.pdf
File Function: First version, 2009
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File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/Supermarketmergers_June10.pdf
File Function: Revised version, 2009
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File URL: http://www.degruyter.com/view/j/jafio.2010.8.1/issue-files/jafio.2010.8.issue-1.xml
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Bibliographic Info

Paper provided by South Dakota State University, Department of Economics in its series SDSU Working Papers in Progress with number 12009.

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Length: 33 pages
Date of creation: Sep 2009
Date of revision: Jun 2010
Publication status: Published in Journal of Food and Agricultural Industrial Organization, Vol. 8 (2010) Prices, Promotions, and Supermarket Mergers
Handle: RePEc:sda:workpa:12009

Contact details of provider:
Postal: Box 504, Scobey Hall, Brookings, SD 57007-0895
Phone: 605-688-4141
Fax: 605-688-6386
Web page: http://www.sdstate.edu/econ/
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Related research

Keywords: Food prices; supermarket; merger; price discrimination;

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References

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  1. Peter E. Rossi & Judith A. Chevalier & Anil K. Kashyap, 2002. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," Yale School of Management Working Papers ysm291, Yale School of Management.
  2. Kinsey, Jean D., 1998. "Concentration Of Ownership In Food Retailing: A Review Of The Evidence About Consumer Impact," Working Papers 14329, University of Minnesota, The Food Industry Center.
  3. Lamm, R McFall, 1981. "Prices and Concentration in the Food Retailing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 30(1), pages 67-78, September.
  4. Berck, Peter & Brown, Jennifer & Perloff, Jeffrey M. & Villas-Boas, Sofia Berto, 2008. "Sales: Tests of theories on causality and timing," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1257-1273, November.
  5. Connor, John M., 1999. "Evolving Research On Price Competition In The Grocery Retailing Industry: An Appraisal," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(2), October.
  6. Leslie E. Papke & Jeffrey M. Wooldridge, 1993. "Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates," NBER Technical Working Papers 0147, National Bureau of Economic Research, Inc.
  7. Bonanno, Alessandro & Lopez, Rigoberto A., 2007. "Competition Effects of Supermarket Services," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9833, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Park, Timothy A. & Weliwita, Ananda, 1996. "Competitive Behavior In The Food Retailing Industry," Faculty Series 16680, University of Georgia, Department of Agricultural and Applied Economics.
  9. Graddy, Kathryn, 1997. "Do Fast-Food Chains Price Discriminate on the Race and Income Characteristics of an Area?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 391-401, October.
  10. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-86, August.
  11. Jagmohan S. Raju & V. Srinivasan & Rajiv Lal, 1990. "The Effects of Brand Loyalty on Competitive Price Promotional Strategies," Management Science, INFORMS, vol. 36(3), pages 276-304, March.
  12. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June.
  13. Chevalier, Judith A, 1995. " Do LBO Supermarkets Charge More? An Empirical Analysis of the Effects of LBOs on Supermarket Pricing," Journal of Finance, American Finance Association, vol. 50(4), pages 1095-1112, September.
  14. Mary Coleman & David Meyer & David Scheffman, 2003. "Economic Analyses of Mergers at the FTC: The Cruise Ships Mergers Investigation," Review of Industrial Organization, Springer, vol. 23(2), pages 121-155, September.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Supermarkets are merging again. What does that mean for your grocery bill?
    by ? in Ezra Klein on 2013-07-29 00:44:00
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Cited by:
  1. 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.
  2. Richard Volpe, 2013. "Promotional Competition Between Supermarket Chains," Review of Industrial Organization, Springer, vol. 42(1), pages 45-61, February.

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