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The Predatory Impacts of the Ahold/Pathmark Offer to Buy the Big V ShopRite Supermarket Chain

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  • Ronald W. Cotterill
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    Abstract

    This paper presents a unique empirical analysis of Salop and Scheffman?s raising rival?s cost theory of predation. The cost efficiency of cooperative wholesaling organizations including the nations largest, Wakefern Food Corporation, are highly susceptible to throughput volume. The Royal Ahold/Pathmark offer to purchase Wakefern?s largest member via a bankruptcy proceeding that attempted to supercede its membership contract, if consummated, would have reduced Wakefern?s volume by 13 percent. It also would have triggered a domino effect of other member exits because it would have raised the costs of supplying remaining members. This report marshals the available empirical evidence to demonstrate that the predatory move by Royal Ahold and Pathmark would most likely be very profitable for them because it would have diminished competition in many markets where they compete with ShopRite supermarkets. Thus in this case, the move is credible.

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    File URL: http://fmpc.uconn.edu/publications/rr/rr64.pdf
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    Bibliographic Info

    Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 064.

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    Date of creation: 2002
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    Handle: RePEc:zwi:fpcrep:064

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    Related research

    Keywords: predation; market power; wholesale concentration; cost efficiency; Industrial Organization;

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