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Spatial Competition in the French Supermarket Industry

Listed author(s):
  • Stéphane Turolla

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,

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File URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.121-122.213
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Article provided by GENES in its journal Annals Of Economics and Statistics.

Volume (Year): (2016)
Issue (Month): 121-122 ()
Pages: 213-259

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Handle: RePEc:adr:anecst:y:2016:i:121-122:p:213-259
DOI: 10.15609/annaeconstat2009.121-122.213
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  1. Barros, Pedro Pita & Brito, Duarte & de Lucena, Diogo, 2006. "Mergers in the food retailing sector: An empirical investigation," European Economic Review, Elsevier, vol. 50(2), pages 447-468, February.
  2. Michael Cohen & Ronald W. Cotterill, 2009. "Assessing the Impact of Retailer Store Brand Presence on Manufacturer Brands in an Equilibrium Framework," Food Marketing Policy Center Research Reports 119, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  3. Timothy J. Richards & Stephen F. Hamilton, 2006. "Rivalry in Price and Variety among Supermarket Retailers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 710-726.
  4. Dubois, Pierre & Jodar-Rosell, Sandra, 2010. "Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model," TSE Working Papers 10-159, Toulouse School of Economics (TSE).
  5. Paul B. Ellickson & Sanjog Misra, 2008. "Supermarket Pricing Strategies," Marketing Science, INFORMS, vol. 27(5), pages 811-828, 09-10.
  6. Marie-Laure Allain & Claire Chambolle, 2011. "Anti-Competitive Effects of resale-Below-Cost Laws," Post-Print hal-00367492, HAL.
  7. repec:cpm:opuscl:13 is not listed on IDEAS
  8. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
  9. Asplund, Marcus & Friberg, Richard, 2002. " Food Prices and Market Structure in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 547-566, December.
  10. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
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