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CAN ENTRY OR EXIT EVENT STUDIES INFORM HORIZONTAL MERGER ANALYSIS? EVIDENCE FROM GROCERY RETAILING
Author(s) -
Hosken Daniel S.,
Olson Luke M.,
Smith Loren K.
Publication year - 2016
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12208
Subject(s) - estimator , economics , event study , econometrics , grocery store , falling (accident) , monetary economics , barriers to entry , microeconomics , business , advertising , statistics , mathematics , market structure , medicine , paleontology , context (archaeology) , environmental health , biology
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)