Spatial Competition in the French Supermarket Industry
This paper challenges the conventional wisdom of a competitive grocery retail sector in France. To measure the intensity of competition in this sector, 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. Retail competition in the French supermarket industry appears to be highly localized in that margins are very sensitive to the presence of a competitor within a few kilometers. Finally, I perform counterfactual experiments to quantify the expected gain of an additional store on consumer welfare and retail prices,
Volume (Year): (2016)
Issue (Month): 121-122 ()
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