Prices, Promotions, and Supermarket Mergers
Using a unique data set of transaction-level retail food sales, I find that food prices are negatively related to supermarket chains shares of total U.S. food sales. The negative relationship suggests that supermarket chains enjoy economies of scale or benefit from an improved post-merger bargaining position. In contrast, the regressions also show an increase in price after a merger, which is independent from changes in observable control variables. Subsequent fractional logit analysis suggests mergers are associated with decreases in the frequency and depth of price-promotions. These latter effects suggest supermarkets enjoy greater unilateral pricing power post-merger, perhaps due to improved brand identity.
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Volume (Year): 8 (2010)
Issue (Month): 1 (November)
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