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Incumbent's price response to new entry: The case of Japanese supermarkets

  • Abe, Naohito
  • Kawaguchi, Daiji

Large-scale supermarkets have rapidly expanded in Japan over the past two decades, partly because of zoning deregulations for large-scale merchants. This study examines the effect of supermarket openings on the price of national-brand products sold at local incumbents, using scanner price data with a panel structure. Detailed geographic information on store location enables us to define treatment and control groups to control for unobserved heterogeneity and temporary demand shock. The analysis reveals that stores in the treatment group lowered their prices of curry paste, bottled tea, instant noodles, and toothpaste by 0.4-3.1% more than stores in a control group in response to a large-scale supermarket opening.

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Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 24 (2010)
Issue (Month): 2 (June)
Pages: 196-212

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Handle: RePEc:eee:jjieco:v:24:y:2010:i:2:p:196-212
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  1. Noel, Michael & Basker, Emek, 2007. "The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry Into The Supermarket Industry," University of California at San Diego, Economics Working Paper Series qt4nq8d4sm, Department of Economics, UC San Diego.
  2. Mark D. Manuszak & Charles C. Moul, 2008. "PRICES AND ENDOGENOUS MARKET STRUCTURE IN OFFICE SUPPLY SUPERSTORES -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 94-112, 03.
  3. Jerry Hausman & Ephraim Leibtag, 2004. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Working Papers 10712, National Bureau of Economic Research, Inc.
  4. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
  5. Loreto Lira & Rosario Rivero & Rodrigo Vergara, 2007. "Entry and Prices: Evidence from the Supermarket Sector," Review of Industrial Organization, Springer, vol. 31(4), pages 237-260, December.
  6. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
  7. Jerry Hausman & Ephraim Leibtag, 2005. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart," NBER Working Papers 11809, National Bureau of Economic Research, Inc.
  8. Emek Basker, 2004. "Selling a Cheaper Mousetrap: Wal-Mart's Effect on Retail Prices," Working Papers 0401, Department of Economics, University of Missouri, revised 16 Mar 2004.
  9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  10. Kenn Ariga & Kenji Matsui & Makoto Watanabe, 2001. "Hot and Spicy: Ups and Downs on the Price Floor and Ceiling at Japanese Supermarkets," Asia Pacific Economic Papers 316, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
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