Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, January 20, 2012

Entry of Wal-Mart Supercenters and Supermarkets' Profit Margins

Posted by D. Daniel Sokol

Rigoberto A. Lopez (Department of Agriculture and Resource Economics, University of Connecticut) and Xiaoou Liu analyze Entry of Wal-Mart Supercenters and Supermarkets' Profit Margins.

ABSTRACT: This article quantifies the impact of Wal-Mart Supercenters on supermarkets’ profitability via a two-stage dynamic entry game, using method of simulated moments and milk scanner data from Dallas/Fort Worth supermarkets. The empirical findings show that the entry of Wal-Mart Supercenters accounts for about an average 50% decrease in milk profit margins for incumbent supermarkets. Effects of scale are found to be more significant for Wal-Mart Supercenters than for incumbent supermarkets, granting Wal-Mart a competitive edge.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/01/entry-of-wal-mart-supercenters-and-supermarkets-profit-margins-.html

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