Ex-post Evaluation of Mergers in the Supermarket Industry
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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.
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