IDEAS home Printed from https://ideas.repec.org/p/sda/workpa/12009.html
   My bibliography  Save this paper

Price and promotion effects of supermarket mergers

Author

Listed:
  • Davis, David E.

    () (Department of Economics, South Dakota State University)

Abstract

I use a unique data set of retail food prices to analyze mergers between supermarket chains. The data allow for an examination of the effects of mergers on prices, the frequency of promotions, and the depth of promotions. I find that increases in a chain’s share of the total US food sales are associated with price decreases, suggesting that supermarkets enjoy economies of scale and/or benefit from an improved bargaining position relative to their suppliers after a merger. I also find that mergers are associated with decreases in the frequency and depth of price-promotions.

Suggested Citation

  • Davis, David E., 2009. "Price and promotion effects of supermarket mergers," SDSU Working Papers in Progress 12009, South Dakota State University, Department of Economics, revised Jun 2010.
  • Handle: RePEc:sda:workpa:12009
    as

    Download full text from publisher

    File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/SupermarketmergersSept09.pdf
    File Function: First version, 2009
    Download Restriction: no

    File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/Supermarketmergers_June10.pdf
    File Function: Revised version, 2009
    Download Restriction: no

    File URL: http://www.degruyter.com/view/j/jafio.2010.8.1/issue-files/jafio.2010.8.issue-1.xml
    File Function: Journal download link
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alessandro Bonanno & Rigoberto A. Lopez, 2007. "Competition Effects of Supermarket Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 555-568.
    2. Lamm, R McFall, 1981. "Prices and Concentration in the Food Retailing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 30(1), pages 67-78, September.
    3. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-569, June.
    4. Berck, Peter & Brown, Jennifer & Perloff, Jeffrey M. & Villas-Boas, Sofia Berto, 2008. "Sales: Tests of theories on causality and timing," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1257-1273, November.
    5. Park, Timothy A. & Weliwita, Ananda, 1996. "Competitive Behavior In The Food Retailing Industry," Faculty Series 16680, University of Georgia, Department of Agricultural and Applied Economics.
    6. Jagmohan S. Raju & V. Srinivasan & Rajiv Lal, 1990. "The Effects of Brand Loyalty on Competitive Price Promotional Strategies," Management Science, INFORMS, vol. 36(3), pages 276-304, March.
    7. 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.
    8. Connor, John M., 1999. "Evolving Research on Price Competition in the Grocery Retailing Industry: An Appraisal," Agricultural and Resource Economics Review, Cambridge University Press, vol. 28(02), pages 119-127, October.
    9. Plümper, Thomas & Troeger, Vera E., 2007. "Efficient Estimation of Time-Invariant and Rarely Changing Variables in Finite Sample Panel Analyses with Unit Fixed Effects," Political Analysis, Cambridge University Press, vol. 15(02), pages 124-139, March.
    10. 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.
    11. Mary Coleman & David Meyer & David Scheffman, 2003. "Economic Analyses of Mergers at the FTC: The Cruise Ships Mergers Investigation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(2), pages 121-155, September.
    12. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    13. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," American Economic Review, American Economic Association, vol. 93(1), pages 15-37, March.
    14. Chevalier, Judith A, 1995. " Do LBO Supermarkets Charge More? An Empirical Analysis of the Effects of LBOs on Supermarket Pricing," Journal of Finance, American Finance Association, vol. 50(4), pages 1095-1112, September.
    15. Graddy, Kathryn, 1997. "Do Fast-Food Chains Price Discriminate on the Race and Income Characteristics of an Area?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 391-401, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Supermarkets are merging again. What does that mean for your grocery bill?
      by ? in Ezra Klein on 2013-07-29 05:44:00

    Citations

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


    Cited by:

    1. Richard Volpe, 2013. "Promotional Competition Between Supermarket Chains," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 45-61, February.

    More about this item

    Keywords

    Food prices; supermarket; merger; price discrimination;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:sda:workpa:12009. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Davis). General contact details of provider: http://edirc.repec.org/data/edsdsus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.