Monday, January 26, 2009
Posted by D. Daniel Sokol
Loreto Lira (Economics Department, Universidad de los Andes- Chile), Magdalena Ugarte (Economics Department, Universidad de los Andes- Chile), and Rodrigo Vergara (Economics Department, Pontificia Universidad Católica de Chile) provide analysis on Prices and Market Structure: An Empirical Analysis of the Supermarket Industry in Chile.
ABSTRACT: This paper investigates empirically the relationship between market structure and consumer prices in the supermarket industry in Chile. A panel of monthly data from 16 cities in the period January 1998–September 2006 was used. It was found that the more concentrated the industry is in a city, the higher the prices, while the participation of major national chains in cities tends to lower prices. Moreover, the dominant local chain was found to behave differently depending on whether or not one of the national chains was present in the city. Finally, we find that prices rise when a national chain acquires another chain and both were previously in a city (inmerge) while if only one of the two was present (outmerge), prices fall.