The Competitive Effects of Entry: Evidence from Supercenter Expansion
- (pp. 175-206)
Abstract
Coupling weekly grocery transactions with the exact location and opening date of Walmarts over an 11-year period, we examine how Supercenter entry affects prices and revenues at incumbent supermarkets. We find that entry within 1 mile of an incumbent causes a sharp 16 percent drop in revenue, a competitive effect that decays quickly with distance. Surprisingly, despite large cross-sectional differences in supermarket prices by exposure to Walmart, our findings also indicate that Supercenter entry has no causal effect on incumbent prices. This result is robust across many dimensions, including a lack of price response for individual products, and across brands within a category.Citation
Arcidiacono, Peter, Paul B. Ellickson, Carl F. Mela, and John D. Singleton. 2020. "The Competitive Effects of Entry: Evidence from Supercenter Expansion." American Economic Journal: Applied Economics, 12 (3): 175-206. DOI: 10.1257/app.20180047Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- L81 Retail and Wholesale Trade; e-Commerce
- R32 Other Spatial Production and Pricing Analysis
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