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Is Wal-Mart Good for Competition? Evidence from Milk Prices

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  • Rebecca L. O. Cleary

    ()
    (University of Connecticut)

  • Rigoberto A. Lopez

    ()
    (University of Connecticut)

Abstract

This article examines the impact of Wal-Mart Supercenters’ entry on incumbents’ pricing behavior and demand. Using a structural model and milk data from the Dallas/Fort Worth supermarket chains, empirical results show that an expansion of Supercenters caused incumbents to price milk significantly more competitively, dropping on average 22.5% between 1996 and 2002, in spite of declines in their milk demand. Furthermore, consumer gains exceeded incumbent losses, lending further support to the notion that Wal-Mart is good for competition and consumers.

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File URL: http://fmpc.uconn.edu/publications/rr/rr101.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 101.

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Length: 27 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:zwi:fpcrep:101

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Keywords: Wal-Mart; competition; conduct; entry; supermarkets; food retailing;

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References

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  1. Emek Basker & Michael Noel, 2009. "The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry into the Supermarket Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 977-1009, December.
  2. Capps, Oral, Jr. & Griffin, James M., 1998. "Effect Of A Mass Merchandiser On Traditional Food Retailers," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(1), February.
  3. Rigoberto Lopez & Azzeddine Azzam & Carmen Lirón-España, 2002. "Market Power and/or Efficiency: A Structural Approach," Review of Industrial Organization, Springer, vol. 20(2), pages 115-126, March.
  4. Cotterill, Ronald W. & Putsis, William P., Jr. & Dhar, Ravi, 2000. "Market Share and Price Setting Behavior For Private Labels and National Brands," Research Reports 25209, University of Connecticut, Food Marketing Policy Center.
  5. David Neumark & Junfu Zhang & Stephen Ciccarella, 2006. "The Effects of Wal-Mart on Local Labor Markets," Working Papers 060711, University of California-Irvine, Department of Economics.
  6. Chidmi, Benaissa & Lopez, Rigoberto A. & Cotterill, Ronald W., 2004. "Retail Oligopoly Power, Dairy Compact, And Boston Milk Prices," Research Reports 25212, University of Connecticut, Food Marketing Policy Center.
  7. Gould, Brian W., 1996. "Factors Affecting U.S. Demand For Reduced-Fat Fluid Milk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
  8. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
  9. Georgeanne M. Artz & Kenneth E. Stone, 2006. "Analyzing the Impact of Wal-Mart Supercenters on Local Food Store Sales," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(5), pages 1296-1303.
  10. Jean Kinsey & Ben Senauer, 1996. "Consumer Trends and Changing Food Retailing Formats," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(5), pages 1187-1191.
  11. Vishal P. Singh & Karsten T. Hansen & Robert C. Blattberg, 2006. "Market Entry and Consumer Behavior: An Investigation of a Wal-Mart Supercenter," Marketing Science, INFORMS, vol. 25(5), pages 457-476, September.
  12. Ronald W. Cotterill & William P. Putsis Jr. & Ravi Dhar, 2000. "Market Share and Price Setting Behavior For Private Labels and National Brands," Food Marketing Policy Center Research Reports 051, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  13. Ronald Cotterill & William Putsis, 2000. "Market Share and Price Setting Behavior for Private Labels and National Brands," Review of Industrial Organization, Springer, vol. 17(1), pages 17-39, August.
  14. Chidmi, Benaissa, 2007. "Supermarkets Price Competition in Dallas - Fort Worth Fluid Milk Market," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9677, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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