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The price-concentration relationship in grocery retailing: Retesting Newmark

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  • Chih-ching Yu

    (Department of Business Administration, Dahan Institute of Technology, Hualien, Taiwan)

  • John M. Connor

    (Department of Agricultural Economics, Purdue University, West Lafayette, Indiana)

Abstract

A study by Newmark is one of two price-concentration studies of U.S. grocery retailing that has failed to find a positive relationship. We examined four possible sources of experimental error in this study. The most important source of error was the failure to exclude noncompeting grocery retailers in the construction of the concentration measure. The relationship was also sensitive to controlling for a subgroup of observations from one state, to alternative data sources, and functional form. When these changes were made, concentration was found to be positively associated with the cost of groceries across cities. The relationship was significant despite a small nonrandom sample of cities and unscientifically sampled prices. [Econ Lit citations: L130, L810, L100] © 2002 Wiley Periodicals, Inc.

Suggested Citation

  • Chih-ching Yu & John M. Connor, 2002. "The price-concentration relationship in grocery retailing: Retesting Newmark," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 413-426.
  • Handle: RePEc:wly:agribz:v:18:y:2002:i:4:p:413-426 DOI: 10.1002/agr.10028
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    References listed on IDEAS

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    1. Ronald W. Cotterill, 1999. "Market power and the Demsetz quality critique: An evaluation for food retailing," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 101-118.
    2. Hall, Lana & Schmitz, Andrew & Cothern, James, 1979. "Beef Wholesale-Retail Marketing Margins and Concentration," Economica, London School of Economics and Political Science, vol. 46(183), pages 295-300, August.
    3. Binkley, James K. & Connor, John M., 1996. "Market Competition And Metropolitan-Area Grocery Prices," Working Papers 25988, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    4. Newmark, Craig M., 1990. "A new test of the price-concentration relationship in grocery retailing," Economics Letters, Elsevier, vol. 33(4), pages 369-373, August.
    5. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
    6. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-386, August.
    7. Sexton, Richard J. & Lavoie, Nathalie, 2001. "Food processing and distribution: An industrial organization approach," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 15, pages 863-932 Elsevier.
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    Cited by:

    1. Ronald W. Cotterill, 2002. "An Antitrust Economic Analysis of Stop & Shop's Proposed Acquisition of the Big V Shop Rite Supermarket Chain," Food Marketing Policy Center Research Reports 063, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    2. Connor, John M., 1999. "Evolving Research On Price Competition In The Grocery Retailing Industry: An Appraisal," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(2), October.
    3. Richard J. Volpe & Nathalie Lavoie, 2008. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(1), pages 4-26.
    4. John M. Connor, 2003. "The Changing Structure Of Global Food Markets: Dimensions, Effects, And Policy Implications," Working Papers 03-02, Purdue University, College of Agriculture, Department of Agricultural Economics.
    5. Johan F.M. Swinnen & Anneleen Vandeplas, 2010. "Market power and rents in global supply chains," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 109-120, November.
    6. Volpe, Richard & Saitone, Tina & Sexton, Richard, 2014. "Cost Containment in the WIC Program: Vendor Peer Groups and Reimbursement Rates," Economic Research Report 183224, United States Department of Agriculture, Economic Research Service.
    7. Seres, Antal & Juhász, Anikó & Stauder, Márta, 2005. "A kereskedelmi koncentráció hatásának egyes kérdései
      [Some questions about the effect of trade concentration]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 774-794.
    8. Volpe, Richard J., III & Lavoie, Nathalie, 2005. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," 2005 Annual meeting, July 24-27, Providence, RI 19188, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Richard Volpe, 2013. "Promotional Competition Between Supermarket Chains," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 45-61, February.

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