Entry and prices: Evidence from the supermarket sector
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Date
2007
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Abstract
The purpose of this paper is to investigate the effect on prices of the entry of a large supermarket into a given location. We use a panel with data from fifteen cities in Chile for the period 1998: I-2004: IV. We correct for the potential simultaneity problem derived from the fact that entry can be a response to price differentials. We find that the entry of a hypermarket to a given city reduces relative prices in that local market by 7-11%. Most interestingly, we also find that part of this effect takes place the year before the supermarket actually opens for business.
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Keywords
entry, prices, retail