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Sales and Firm Entry: The Case of Wal‐Mart
Author(s) -
Glandon P. J.,
Jaremski Matthew
Publication year - 2014
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/0038-4038-2012.108
Subject(s) - competition (biology) , business , grocery store , panel data , industrial organization , marketing , advertising , commerce , monetary economics , microeconomics , economics , econometrics , ecology , biology
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.