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Sales and Firm Entry: The Case of Wal‐Mart

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  • P. J. Glandon
  • Matthew Jaremski

Abstract

Temporary price reductions or “sales” have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six‐year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal‐Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss‐leader strategy.

Suggested Citation

  • P. J. Glandon & Matthew Jaremski, 2014. "Sales and Firm Entry: The Case of Wal‐Mart," Southern Economic Journal, John Wiley & Sons, vol. 81(1), pages 168-192, July.
    • Handle: RePEc:wly:soecon:v:81:y:2014:i:1:p:168-192
    DOI: 10.4284/0038-4038-2012.108
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    Cited by:

    1. Bauner, Christoph & Wang, Emily, 2019. "The effect of competition on pricing and product positioning: Evidence from wholesale club entry," International Journal of Industrial Organization, Elsevier, vol. 67(C).

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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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