Ex-post Evaluation of Mergers in the Supermarket Industry
In this paper we quantify the effects of horizontal mergers in the supermarket sector that took place in the US between 2003 and 2005. We contribute to the growing literature on ex-post merger evaluations in three ways: (1) we propose a cleaner identification strategy that results from the different event dates; (2) we quantify the effects on prices, but also on variety; (3) we show that the estimated effects exhibit heterogeneity and explain part of that heterogeneity with event characteristics. Our results indicate no effect on the average prices, but that total product variety in a store goes up by more than \(3\%\) following a merger. We find that the increase in variety after a merger is driven by stores that are not directly involved in the events, for whom the increase is larger than \(4\%\).
KeywordsMergers Supermarkets Ex-post evaluation Variety
We would like to thank the editor (Lawrence White) and two anonymous referees, as well as comments from Mike Abito, Javier Donna, and John Kwoka. This research was funded by a cooperative agreement between the USDA/ERS and Northwestern University, but the views expressed herein are those of the author and do not necessarily reflect the views of the U.S. Department of Agriculture. Financial support from Fundação para a Ciência e Tecnologia is also gratefully acknowledged.
- Ashenfelter, O., Hosken, D., & Weinberg, M. (2013). The price effects of a large merger of manufacturers: A case study of Maytag-Whirlpool. American Economic Journal: Economic Policy, 5(1), 239–261.Google Scholar
- Basker, E., & Noel, M. D. (2013). Competition challenges in the supermarket sector with an application to latin American markets. Report for the World Bank and the Regional Competition Center for Latin AmericaGoogle Scholar
- Bureau of Labor Statistics. (2010). Grocery stores. In Career guide to industries, 2010–11 Edition. Washington, DC: U.S. Department of LaborGoogle Scholar
- Davis, L., & Wolfram, C. (2012). Deregulation, consolidation, and efficiency: Evidence from US nuclear power. American Economic Journal: Applied Economics, 4(4), 194–225.Google Scholar
- Farrell, J., & Shapiro, C. (2010). Antitrust evaluation of horizontal mergers: An economic alternative to market definition. The BE Journal of Theoretical Economics, 10, 1.Google Scholar
- FTC. (FY1996--FY2013). Enforcement Actions in Industry/Sector: Retail - Grocery/Supermarkets.Google Scholar
- Hausman, J., Leonard, G., & Zona, J. D. (1994). Competitive analysis with differentiated products. Annales d’Economie et de Statistique, 159–180. http://doi.org/10.2307/20075951.
- Hirano, K., & Imbens, G. (2001). Estimation of causal effects using propensity score weighting: An application to data on right heart catheterization health services and outcomes research. Methodology, 2, 259–278.Google Scholar
- Hosken, D. (2011). Ex post merger review: What is it and why do we need it?. Agenda March 2011, OxeraGoogle Scholar
- Huang, K. & Stiegert K. (2009). Evaluating a supermarket merger event: The case of Copps and Kohl’s in Madison. In Food System Research Group Monograph, March.Google Scholar
- Katz, M. (2007). Estimating supermarket choice using moment inequalities. Unpublished Ph. D. dissertation, Harvard University.Google Scholar
- Kaufman, P. (2000a). Consolidation in food retailing: Prospects for consumers and grocery suppliers. Agricultural outlook. Washington DC: U.S. Department of Agriculture, Economic Research Service.Google Scholar
- Kaufman, P. (2000b). Grocery retailers demonstrate urge to merge. Food Review, 23, 29–34.Google Scholar
- Kwoka, J. (2013). Does merger control work? A retrospective on U.S. enforcement actions and merger outcomes. Antitrust Law Journal, 78(3), 619–650.Google Scholar
- Marshall, G., & Pires, T. (2017). Measuring the impact of travel costs on grocery shopping. Economic Journal. http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12523/full.Google Scholar
- Trindade, A. (2011). Price and variety in supermarkets: Can store competition hurt consumers ? Unpublished Ph. D. dissertation, Northwestern UniversityGoogle Scholar