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Price and promotion effects of supermarket mergers

  • Davis, David E.

    ()

    (Department of Economics, South Dakota State University)

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.

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File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/SupermarketmergersSept09.pdf
File Function: First version, 2009
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File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/Supermarketmergers_June10.pdf
File Function: Revised version, 2009
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File URL: http://www.degruyter.com/view/j/jafio.2010.8.1/issue-files/jafio.2010.8.issue-1.xml
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Paper provided by South Dakota State University, Department of Economics in its series SDSU Working Papers in Progress with number 12009.

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Length: 33 pages
Date of creation: Sep 2009
Date of revision: Jun 2010
Publication status: Published in Journal of Food and Agricultural Industrial Organization, Vol. 8 (2010) Prices, Promotions, and Supermarket Mergers
Handle: RePEc:sda:workpa:12009
Contact details of provider: Postal: Box 504, Scobey Hall, Brookings, SD 57007-0895
Phone: 605-688-4141
Fax: 605-688-6386
Web page: http://www.sdstate.edu/econ/
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  1. Leslie E. Papke & Jeffrey M. Wooldridge, 1993. "Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates," NBER Technical Working Papers 0147, National Bureau of Economic Research, Inc.
  2. 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 379-86, August.
  3. 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.
  4. 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.
  5. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2000. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," NBER Working Papers 7981, National Bureau of Economic Research, Inc.
  6. Alessandro Bonanno & Rigoberto A. Lopez, 2007. "Competition Effects of Supermarket Services," Food Marketing Policy Center Research Reports 094, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  7. 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 549-69, June.
  8. 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.
  9. Berck, Peter & Brown, Jennifer & Perloff, Jeffrey M & Villas-Boas, Sofia B., 2007. "Sales: Tests of Theories on Causality and Timing," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2g56n1jk, Department of Agricultural & Resource Economics, UC Berkeley.
  10. 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.
  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, vol. 23(2), pages 121-155, September.
  12. 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.
  13. 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.
  14. 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.
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