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Competition Effects of Supermarket Services

Author

Listed:
  • Alessandro Bonanno

    (University of Connecticut)

  • Rigoberto A. Lopez

    (University of Connecticut)

Abstract

This article investigates the competition effects of supermarket food and non-food services using fluid milk as a case study. A simultaneous equation model for services and price competition is estimated with scanner data from 16 supermarket chains operating in six U.S. cities. Empirical results show that a greater scope of services results in higher retail cost, greater supermarket chain-level demand but lower price elasticity, and enhanced market power, all leading to higher milk prices and quantity of milk sold. However, unlike previous research, we conclude that increases in cost rather than market power explain most of the ensuing price increases.

Suggested Citation

  • Alessandro Bonanno & Rigoberto A. Lopez, 2007. "Competition Effects of Supermarket Services," Food Marketing Policy Center Research Reports 094, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    • Handle: RePEc:zwi:fpcrep:094
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    File URL: http://fmpc.uconn.edu/publications/rr/rr94.pdf
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    References listed on IDEAS

    as
    1. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-391, June.
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    Cited by:

    1. Andreas Widenhorn & Klaus Salhofer, 2014. "Price Sensitivity Within and Across Retail Formats," Agribusiness, John Wiley & Sons, Ltd., vol. 30(2), pages 184-194, March.
    2. Davis, David E., 2009. "Price and promotion effects of supermarket mergers," SDSU Working Papers in Progress 12009, South Dakota State University, Department of Economics, revised Jun 2010.
    3. Bonanno, Alessandro & Ghosh, Gaurav S., 2010. "SNAP Efficacy and Food Access – A Nationwide Spatial Analysis," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116437, European Association of Agricultural Economists.
    4. Bonanno, Alessandro & Chenarides, Lauren & Goetz, Stephan J., 2012. "Limited Food Access as an Equilibrium Outcome: An Empirical Analysis," 2012 AAEA/EAAE Food Environment Symposium 123196, Agricultural and Applied Economics Association.
    5. Stephen Martin, 2012. "Market Structure and Market Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(2), pages 87-108, March.

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    More about this item

    Keywords

    retailing; service; pricing; milk; market power; competition;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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