Entry and Prices: Evidence from the Chilean Supermarket Industry

• Autores: Loreto Lira, María del Rosario Rivero Menéndez, Rodrigo Vergara
• Localización: Documentos de Trabajo ( Instituto de Economía PUC ), ISSN-e 0717-7593, Nº. 299, 2005
• Idioma: inglés
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• Resumen

  • One of the most significant developments in the last couple of decades in the retail industry has been the emergence of large supermarkets (hypermarkets). 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. The dependent variable is the price of a bundle of 52 food products in each city relative to Santiago. We find that the entry of a hypermarket to a given city reduces prices in that local market by ten percent. Most interestingly, we also find that half of this effect takes place the year before the supermarket actually opens for business.