IDEAS home Printed from https://ideas.repec.org/a/sae/mareco/v13y2019i1p49-82.html
   My bibliography  Save this article

Are Multinational Retailers Really Selling at Lower Prices Than Domestic Chains? Evidence from Three Sectors

Author

Listed:
  • José Caraballo-Cueto

Abstract

Currently, there is no systematic evidence showing that, 15 years or more after entry, all multinational retailers provide lower prices than domestic buying groups. In the short term, some multinational retailers may lower prices to deter local competitors and attract consumers in a ‘loss leader’ strategy. However, domestic competitors can integrate buying groups to share the benefit of economies of scale with multinational retailers, while holding lower profitability requirements and overhead costs than multinational retailers. We compared multinational retailers to domestic buying groups in a jurisdiction that had one of the highest proportions of Walgreens and Walmart stores in the world. Despite their market power, in our representative samples of goods, there is no evidence that the prices of multinational retailers in the sectors of pharmacies, supermarkets and hardware stores are lower than domestic chains. JEL Codes: M3, R1, L8, F2

Suggested Citation

  • José Caraballo-Cueto, 2019. "Are Multinational Retailers Really Selling at Lower Prices Than Domestic Chains? Evidence from Three Sectors," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(1), pages 49-82, February.
    • Handle: RePEc:sae:mareco:v:13:y:2019:i:1:p:49-82
    DOI: 10.1177/0973801018800082
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0973801018800082
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0973801018800082?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Neumark, David & Zhang, Junfu & Ciccarella, Stephen, 2008. "The effects of Wal-Mart on local labor markets," Journal of Urban Economics, Elsevier, vol. 63(2), pages 405-430, March.
    2. Neil M. Coe & Neil Wrigley, 2007. "Host economy impacts of transnational retail: the research agenda," Journal of Economic Geography, Oxford University Press, vol. 7(4), pages 341-371, July.
    3. Basker, Emek, 2005. "Selling a cheaper mousetrap: Wal-Mart's effect on retail prices," Journal of Urban Economics, Elsevier, vol. 58(2), pages 203-229, September.
    4. Morrissey, Oliver & Udomkerdmongkol, Manop, 2012. "Governance, Private Investment and Foreign Direct Investment in Developing Countries," World Development, Elsevier, vol. 40(3), pages 437-445.
    5. Zhijun Chen & Patrick Rey, 2012. "Loss Leading as an Exploitative Practice," American Economic Review, American Economic Association, vol. 102(7), pages 3462-3482, December.
    6. Fernando Borraz & Juan Dubra & Daniel Ferrés & Leandro Zipitría, 2014. "Supermarket Entry and the Survival of Small Stores," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(1), pages 73-93, February.
    7. Jerry Hausman & Ephraim Leibtag, 2007. "Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal-Mart," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1157-1177.
    8. Ghani, Ejaz & Kerr, William R. & O’Connell, Stephen D, 2011. "Who Creates Jobs?," World Bank - Economic Premise, The World Bank, issue 70, pages 1-7, November.
    9. Stefano DellaVigna & Matthew Gentzkow, 2019. "Uniform Pricing in U.S. Retail Chains," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 2011-2084.
    10. Bianchi, Constanza C. & Ostale, Enrique, 2006. "Lessons learned from unsuccessful internationalization attempts: Examples of multinational retailers in Chile," Journal of Business Research, Elsevier, vol. 59(1), pages 140-147, January.
    11. Alessandro Bonanno & Stephan J. Goetz, 2012. "WalMart and Local Economic Development," Economic Development Quarterly, , vol. 26(4), pages 285-297, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matias Busso & Sebastian Galiani, 2019. "The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 33-56, January.
    2. Charles Courtemanche & Art Carden, 2014. "Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 565-585, January.
    3. Borrescio-Higa, Florencia, 2015. "Can Walmart make us healthier? Prescription drug prices and health care utilization," Journal of Health Economics, Elsevier, vol. 44(C), pages 37-53.
    4. Courtemanche, Charles & Carden, Art, 2011. "Supersizing supercenters? The impact of Walmart Supercenters on body mass index and obesity," Journal of Urban Economics, Elsevier, vol. 69(2), pages 165-181, March.
    5. Castellari Elena & Sckokai Paolo & Bonanno Alessandro, 2019. "Food Retail Liberalization, Food Retail Structure and Food Prices: The Italian Case," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 17(2), pages 1-11, November.
    6. Zipitría, Leandro, 2011. "Impacto económico del Supermercadismo [The Economics of Supermarkets: A Brief Literature Review]," MPRA Paper 28419, University Library of Munich, Germany.
    7. Zhou, Tingyu & Clapp, John M., 2015. "The location of new anchor stores within metropolitan areas," Regional Science and Urban Economics, Elsevier, vol. 50(C), pages 87-107.
    8. Bonanno, Alessandro & Lopez, Rigoberto A., 2012. "Wal-Mart's monopsony power in metro and non-metro labor markets," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 569-579.
    9. Juan Pablo Atal & José Ignacio Cuesta & Felipe González & Cristóbal Otero, 2024. "The Economics of the Public Option: Evidence from Local Pharmaceutical Markets," American Economic Review, American Economic Association, vol. 114(3), pages 615-644, March.
    10. Elliott, Robert & Sun, Puyang & Zhu, Tong, 2020. "Shell shocked: The impact of foreign entry on the gasoline retail market in China," Energy Economics, Elsevier, vol. 86(C).
    11. Alessandro Bonanno & Rigoberto A. Lopez, 2008. "Wal-Mart’s Monopsony Power in Local Labor Markets," Food Marketing Policy Center Research Reports 103, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    12. Daniel Hanner & Daniel Hosken & Luke M. Olson & Loren K. Smith, 2015. "Dynamics in a Mature Industry: Entry, Exit, and Growth of Big‐Box Grocery Retailers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(1), pages 22-46, March.
    13. Alam, Md. Rafayet & Morshed, A.K.M. Mahbub, 2021. "Price dispersion across U.S. cities: The role of Walmart," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 227-237.
    14. Volpe, Richard J., III, 2011. "Evaluating the Performance of U.S. Supermarkets: Pricing Strategies, Competition from Hypermarkets, and Private Labels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(3), pages 1-16, December.
    15. Bjørn Olav Johansen & Tore Nilssen, 2016. "The Economics of Retailing Formats: Competition Versus Bargaining," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 109-134, March.
    16. Fabiano Schivardi & Eliana Viviano, 2011. "Entry Barriers in Retail Trade," Economic Journal, Royal Economic Society, vol. 121(551), pages 145-170, March.
    17. Meilin Ma & Tina L. Saitone & Richard J. Volpe & Richard J. Sexton & Michelle Saksena, 2019. "Market Concentration, Market Shares, and Retail Food Prices: Evidence from the U.S. Women, Infants, and Children Program," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(3), pages 542-562, September.
    18. Neumark, David & Zhang, Junfu & Ciccarella, Stephen, 2008. "The effects of Wal-Mart on local labor markets," Journal of Urban Economics, Elsevier, vol. 63(2), pages 405-430, March.
    19. Gian-Claudia Sciara & Kristin Lovejoy & Susan Handy, 2018. "The Impacts of Big Box Retail on Downtown: A Case Study of Target in Davis (CA)," Journal of the American Planning Association, Taylor & Francis Journals, vol. 84(1), pages 45-60, January.
    20. Cho, Clare & Volpe, Richard, 2017. "Independent Grocery Stores in the Changing Landscape of the U.S. Food Retail Industry," Economic Research Report 265463, United States Department of Agriculture, Economic Research Service.

    More about this item

    Keywords

    FDI; Retailers; Price; Competitiveness;
    All these keywords.

    JEL classification:

    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • L8 - Industrial Organization - - Industry Studies: Services
    • F2 - International Economics - - International Factor Movements and International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:mareco:v:13:y:2019:i:1:p:49-82. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.ncaer.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.