Abstract

http://ssrn.com/abstract=2225681
 
 

References (26)



 
 

Citations (10)



 
 

Footnotes (19)



 


 



Supermarkets as a Natural Oligopoly


Paul B. Ellickson


University of Rochester - Simon School of Business

April 2013

Economic Inquiry, Vol. 51, Issue 2, pp. 1142-1154, 2013

Abstract:     
This paper proposes and tests a model of supermarket competition based upon an endogenous fixed cost (EFC) framework (Sutton, J. Sunk Cost and Market Structure: Price Competition, Advertising, and the Evolution of Concentration. Cambridge: MIT Press, 1991.). The relevance of the EFC framework to supermarket competition stems from the industry's surprisingly uniform competitive structure: irrespective of the size of the local market, a small number of firms (between three and six) capture the majority of sales. As markets grow, local rivalry drives firms to expand their fixed investments, limiting the number of firms that can profitably enter even the largest markets. Although markets stay concentrated, competition remains fierce, reflecting the inherently rivalrous nature of the underlying competitive mechanism. The goal of this paper is to identify the strategic focus of this rivalry, namely the drive to provide an ever greater variety of consumer products, and to eliminate alternative explanations for the observed structure by highlighting the unique form of firm conduct that characterizes this industry.

Number of Pages in PDF File: 13

JEL Classification: D21, D43, L11, L13, L22, L81

Accepted Paper Series





Date posted: February 27, 2013  

Suggested Citation

Ellickson, Paul B., Supermarkets as a Natural Oligopoly (April 2013). Economic Inquiry, Vol. 51, Issue 2, pp. 1142-1154, 2013. Available at SSRN: http://ssrn.com/abstract=2225681 or http://dx.doi.org/10.1111/j.1465-7295.2011.00432.x

Contact Information

Paul B. Ellickson (Contact Author)
University of Rochester - Simon School of Business ( email )
Rochester, NY 14627
United States

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References:  26
Citations:  10
Footnotes:  19

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