July 20, 2012
Spatial competition in the French supermarket industry
Posted by D. Daniel Sokol
Stephane TUROLLA (INRA) addresses Spatial competition in the French supermarket industry.
ABSTRACT: This paper challenges the conventional wisdom on the competitive grocery retail sector in France. To that end, I develop a structural model of spatial competition that accounts for (i) market geography on consumers' preferences, and (ii) differences in their shopping list. The demand estimates are used to recover stores' price-cost margin under alternative pricing strategies. I select the best pricing model by applying non-nested tests and show that retailers noticeably distort their offer in highly concentrated markets. Finally, I perform counterfactual experiments to quantify the expected gain of an additional store on consumer welfare and retail prices.
July 20, 2012 | Permalink
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