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Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

Author

Listed:
  • Charles Courtemanche

    () (Department of Economics, Andrew Young School of Policy Studies, Georgia State University, P.O. Box 3992, Atlanta GA 30302-3992, USA; corresponding author)

  • Art Carden

    () (Department of Economics, Finance, and Quantitative Analysis, Brock School of Business, Samford University, 800 Lakeshore Drive, Birmingham AL 35226, USA;)

Abstract

Prior research shows that grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big-box retailers—Costco and Walmart-owned Sam's Club—are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along nonprice dimensions, such as product quality or quality of the shopping experience. We find no evidence that Sam's Club entry affects grocery stores' prices, consistent with Sam's Club's focus on small businesses instead of consumers.

Suggested Citation

  • Charles Courtemanche & Art Carden, 2014. "Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices," Southern Economic Journal, Southern Economic Association, vol. 80(3), pages 565-585, January.
  • Handle: RePEc:sej:ancoec:v:80:3:y:2014:p:565-585
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    File URL: http://dx.doi.org/10.4284/0038-4038-2012.135
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    References listed on IDEAS

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    1. Russell S. Sobel & Andrea M Dean, 2008. "Has Wal-Mart Buried Mom And Pop?: The Impact Of Wal-Mart On Self-Employment And Small Establishments In The United States," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 676-695, October.
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Charles J. Courtemanche & Art Carden & Murugi Ndirangu & Xilin Zhou, 2018. "Do Walmart Supercenters Improve Food Security?," NBER Working Papers 24750, National Bureau of Economic Research, Inc.
    2. Emek Basker & Muhammad Taimur Khan, 2016. "Does the Minimum Wage Bite into Fast-Food Prices?," Journal of Labor Research, Springer, vol. 37(2), pages 129-148, June.
    3. Charles J. Courtemanche & Joshua C. Pinkston & Christopher J. Ruhm & George L. Wehby, 2016. "Can Changing Economic Factors Explain the Rise in Obesity?," Southern Economic Journal, Southern Economic Association, vol. 82(4), pages 1266-1310, April.
    4. Hunt Allcott & Rebecca Diamond & Jean-Pierre Dubé, 2017. "The Geography of Poverty and Nutrition: Food Deserts and Food Choices Across the United States," NBER Working Papers 24094, National Bureau of Economic Research, Inc.
    5. Emek Basker, 2015. "Change at the Checkout: Tracing the Impact of a Process Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 339-370, June.
    6. Zipitría, Leandro, 2011. "Impacto económico del Supermercadismo
      [The Economics of Supermarkets: A Brief Literature Review]
      ," MPRA Paper 28419, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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