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Can Entry Or Exit Event Studies Inform Horizontal Merger Analysis? Evidence From Grocery Retailing

Author

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  • Daniel S. Hosken
  • Luke M. Olson
  • Loren K. Smith

Abstract

type="main" xml:id="ecin12208-abs-0001"> This study estimates how prices change following the entry and exit of grocery retailers. We estimate the effects of entry (exit) by comparing affected markets to a set of unaffected markets using both a difference-in-difference estimator and a synthetic control estimator. We find that entry typically results in reduced prices. More surprisingly, we find that exit is frequently associated with falling prices. Our estimated effects of entry on grocery prices are similar in magnitude to estimates of merger price effects in the supermarket industry. This finding suggests that entry event studies may be a useful tool for horizontal merger analysis. (JEL L11, L4, L81)

Suggested Citation

  • Daniel S. Hosken & Luke M. Olson & Loren K. Smith, 2016. "Can Entry Or Exit Event Studies Inform Horizontal Merger Analysis? Evidence From Grocery Retailing," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 342-360, January.
    • Handle: RePEc:bla:ecinqu:v:54:y:2016:i:1:p:342-360
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    File URL: http://hdl.handle.net/10.1111/ecin.2016.54.issue-1
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    Citations

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    Cited by:

    1. Matthew Freedman & Annemarie Kuhns, 2018. "Supply-side subsidies to improve food access and dietary outcomes: Evidence from the New Markets Tax Credit," Urban Studies, Urban Studies Journal Limited, vol. 55(14), pages 3234-3251, November.
    2. Stefan Szymanski, 2017. "Entry into exit: insolvency in English professional football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 419-444, September.
    3. Rabbani, Maysam, 2023. "Mergers with future rivals can boost prices, bar entry, and intensify market concentration," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    4. Daniel S. Hosken & Luke M. Olson & Loren K. Smith, 2018. "Do retail mergers affect competition? Evidence from grocery retailing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 3-22, March.
    5. Rebecca Cleary & Lauren Chenarides, 2022. "Food retail profits, competition, and the Great Recession," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 557-578, July.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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