Do Lbo Supermarkets Charge More? An Empirical Analysis of the Effects of Lbos on Supermarket Pricing

JOURNAL OF FINANCE, Vol 50 No 4, September 1995

Posted: 25 Aug 1998

See all articles by Judith A. Chevalier

Judith A. Chevalier

Yale School of Management; National Bureau of Economic Research (NBER)

Abstract

This paper examines changes in supermarket prices in local markets following supermarket leveraged buyouts (LBOs). I find that prices rise following LBOs in local markets in which the LBO firm's rivals are also highly leveraged and that LBO firms have higher prices than their less leveraged rivals, suggesting that LBOs create incentives to raise prices. However, I also find that prices fall following LBOs in local markets in which rival firms have low leverage and are concentrated. These price drops are associated with LBO firms exiting the local market, suggesting that rivals attempt to "prey" on LBO chains.

JEL Classification: G32

Suggested Citation

Chevalier, Judith A., Do Lbo Supermarkets Charge More? An Empirical Analysis of the Effects of Lbos on Supermarket Pricing. JOURNAL OF FINANCE, Vol 50 No 4, September 1995. Available at SSRN: https://ssrn.com/abstract=6659

Judith A. Chevalier (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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