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Competition Effects of Supermarket Services
Author(s) -
Bonanno Alessandro,
Lopez Rigoberto A.
Publication year - 2009
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2009.01255.x
Subject(s) - competition (biology) , price elasticity of demand , competitor analysis , market power , business , economies of scope , industrial organization , elasticity (physics) , microeconomics , economics , marketing , economies of scale , ecology , monopoly , materials science , composite material , biology
This article investigates the competition effects of supermarket services using fluid milk as a case study. A simultaneous equation model for services and price competition is estimated with scanner data from fifteen supermarket chains using two alternative measures of services, namely store size and principal components of in‐store services. Empirical results show that increasing services results in economies of scope, greater supermarket chain‐level demand, lower price elasticity of demand, and enhanced market power, leading to higher milk prices and quantity sold. We conclude that, as result of service competition, supermarkets differentiate themselves from competitors and successfully attract less price‐sensitive consumers.