The Competitive Effects of Entry: Evidence from Supercenter Expansion
41 Pages Posted: 2 Oct 2017
Date Written: September 2016
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
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