The Impact of Dollar Store Expansion on Local Market Structure and Food Access

The Impact of Dollar Store Expansion on Local Market Structure and Food Access

 

El Hadi Caoui

Rotman School of Management; University of Toronto at Mississauga - Department of Management

Brett Hollenbeck

University of California, Los Angeles (UCLA) - Anderson School of Management

Matthew Osborne

University of Toronto at Mississauga - Department of Management

Date Written: June 22, 2022

Abstract

This paper studies the expansion of dollar store chains in the U.S. retail landscape following the Great Recession (2008–2019). This expansion has been accompanied by growing public concern over the impact on local retail markets and food accessibility in local communities. We develop an empirical framework to evaluate this impact and the role of entry regulation policies. A dynamic game of entry, exit and investment into spatially differentiated locations is specified, allowing for chain-level economies of density. Reduced-form evidence and counterfactual simulations reveal that dollar store chains compete strongly with the grocery and convenience segments and that dollar store expansion has led to a large decline in the number of grocery stores, and modest but significant reduction in fresh produce consumption.