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The Competitive Effects of Entry: Evidence from Supercenter Expansion

41 Pages Posted: 2 Oct 2017  

Peter Arcidiacono

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Paul B. Ellickson

University of Rochester - Simon Business School

Carl F. Mela

Duke University - Fuqua School of Business

John D. Singleton

University of Rochester - Department of Economics

Date Written: September 2016

Abstract

Coupling weekly grocery transaction records with the exact location and opening date of entering Walmarts over an eleven year period, we examine how their entry affects prices and revenues at incumbent supermarkets. We find that Walmart Supercenter entry within one mile of an incumbent causes a sharp 16% drop in revenue, an effect that decays quickly with distance. Surprisingly, despite large cross store differences in prices of supermarkets by exposure to Walmart, our findings also indicate that Supercenter entry has no causal effect on incumbent prices. This lack of a price response is robust across many dimensions including, but not limited to, a lack of response for individual categories and brands within a category.

Keywords: supermarkets, Walmart, price response

Suggested Citation

Arcidiacono, Peter and Ellickson, Paul B. and Mela, Carl F. and Singleton, John D., The Competitive Effects of Entry: Evidence from Supercenter Expansion (September 2016). Available at SSRN: https://ssrn.com/abstract=3045492

Peter Arcidiacono

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul B. Ellickson (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Carl F. Mela

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7767 (Phone)

John D. Singleton

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627
United States

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