Tuesday, October 6, 2009
Posted by D. Daniel Sokol
David E. Davis (Department of Economics, South Dakota State University) provides his thoughts on Price and promotion effects of supermarket mergers.
ABSTRACT: I use a unique data set of retail food prices to analyze mergers between supermarket chains. The data allow for an examination of the effects of mergers on prices, the frequency of promotions, and the depth of promotions. I find that increases in a chain’s share of the total US food sales are associated with price decreases, suggesting that supermarkets enjoy economies of scale and/or benefit from an improved bargaining position relative to their suppliers after a merger. I also find that mergers are associated with decreases in the frequency and depth of price-promotions.