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Market Competition, and Metropolitan-Area Grocery Prices

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  • Binkley, James K.
  • Connor, John M.

Abstract

This paper examines the relationship of 1987 retail grocery prices to supermarket sales concentration across 95 U.S. metropolitan areas. The regression model incorporates a large number of population, retail-cost, and retail competition factors and separate prices by type of grocery item. We find that the concentration-price relationship is sensitive to item type: positive for packaged, branded, dry groceries and unrelated for produce, meat, and dairy product prices. As for market rivalry, we find that small grocery stores provide no grocery price competition for supermarkets. However, branded grocery prices are driven down by fast-food places and by rapid price churning, whereas for unbranded foods the presence of warehouse stores places downward pressure on supermarket prices while fast-food presence does not. For the branded-groceries component, we also find prices higher in large, fast-growing, low- income, Eastern cities. We also find that cities where rents, wages, and electricity costs are high tend to have high dry grocery prices. However, for the unbranded-products component retail costs are unrelated to prices, and cities in the South have the highest prices.
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Suggested Citation

  • Binkley, James K. & Connor, John M., 1996. "Market Competition, and Metropolitan-Area Grocery Prices," Staff Papers 200407, Purdue University, Department of Agricultural Economics.
    • Handle: RePEc:ags:puaesp:200407
    DOI: 10.22004/ag.econ.200407
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    Cited by:

    1. 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.
    2. Alessandro Bonanno & Rigoberto A. Lopez, 2004. "Private Labels, Retail Configuration, and Fluid Milk Prices," Food Marketing Policy Center Research Reports 082, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    3. Leschewski, Andrea Marie & Weatherspoon, Dave D., 2014. "Fast Food Restaurant Pricing Strategies in Michigan Food Deserts," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(A), pages 1-24, March.
    4. Volpe, Richard J., III & Lavoie, Nathalie, 2006. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Working Paper Series 14515, University of Massachusetts, Amherst, Department of Resource Economics.
    5. Kinsey, Jean D., 1998. "Concentration Of Ownership In Food Retailing: A Review Of The Evidence About Consumer Impact," Working Papers 14329, University of Minnesota, The Food Industry Center.
    6. 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.
    7. Martens, Bobby J. & Dooley, Frank J. & Kim, Sounghun, 2006. "The Effect Of Entry By Wal-Mart Supercenters On Retail Grocery Concentration," 2006 Annual meeting, July 23-26, Long Beach, CA 21101, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Digal, Larry N. & Ahmadi-Esfahani, Fredoun Z., 2002. "Market power analysis in the retail food industry: a survey of methods," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-26.
    9. Frigon, Mathieu & Doyon, Maurice & Romain, Robert F.J., 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Research Reports 25220, University of Connecticut, Food Marketing Policy Center.
    10. 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).
    11. Chung, Chanjin & Henneberry, Shida Rastegari & Tostao, Emilio, 2004. "Will The Voluntary Checkoff Program Be The Answer? An Analysis Of Optimal Advertising And Free-Rider Problem In The U.S. Beef Industry," 2004 Annual Meeting, February 14-18, 2004, Tulsa, Oklahoma 34694, Southern Agricultural Economics Association.

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