[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/zbw/espost/279479.html
   My bibliography  Save this article

The effect of mergers on variety in grocery retailing

Author

Listed:
  • Argentesi, Elena
  • Buccirossi, Paolo
  • Cervone, Roberto
  • Duso, Tomaso
  • Marrazzo, Alessia
Abstract
We study a merger between two Dutch supermarket chains to assess its effect on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in pre-merger competitive conditions and thus in the merger outcomes. To define our control group, we account for selection on observables through a matching procedure. We observe that, after the merger, the assortment of the merging parties converges in markets where they are not directly competing one with the other. Instead, the merging parties reposition their assortment to avoid cannibalization in the areas where they directly competed before the merger. While the target’s stores reduce the depth of their assortment when in direct competition with the acquirer’s, the latter increase their assortment. This suggests that variety is a strategic variable in retail chains’ response to changes in local competition.

Suggested Citation

  • Argentesi, Elena & Buccirossi, Paolo & Cervone, Roberto & Duso, Tomaso & Marrazzo, Alessia, 2021. "The effect of mergers on variety in grocery retailing," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 79, pages 1-19.
    • Handle: RePEc:zbw:espost:279479
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/279479/1/Argentesi_2021_Effect_Mergers_Grocery.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ying Fan & Chenyu Yang, 2020. "Competition, Product Proliferation, and Welfare: A Study of the US Smartphone Market," American Economic Journal: Microeconomics, American Economic Association, vol. 12(2), pages 99-134, May.
    2. Chenghuan Sean Chu, 2010. "The effect of satellite entry on cable television prices and product quality," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 730-764, December.
    3. Alon Eizenberg & Saul Lach & Merav Oren-Yiftach, 2021. "Retail Prices in a City," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 175-206, May.
    4. Thomas W. Quan & Kevin R. Williams, 2018. "Product variety, across‐market demand heterogeneity, and the value of online retail," RAND Journal of Economics, RAND Corporation, vol. 49(4), pages 877-913, December.
    5. Alberto Abadie & Susan Athey & Guido W Imbens & Jeffrey M Wooldridge, 2023. "When Should You Adjust Standard Errors for Clustering?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 138(1), pages 1-35.
    6. Marie-Laure Allain & Claire Chambolle & Stéphane Turolla & Sofia B. Villas-Boas, 2017. "Retail Mergers and Food Prices: Evidence from France," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 469-509, September.
    7. 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).
    8. Luca Aguzzoni & Elena Argentesi & Lorenzo Ciari & Tomaso Duso & Massimo Tognoni, 2016. "Ex post Merger Evaluation in the U.K. Retail Market for Books," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 170-200, March.
    9. Lommerud, Kjell Erik & Sorgard, Lars, 1997. "Merger and product range rivalry," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 21-42, November.
    10. Charlotte R. Ren & Ye Hu & Yu (Jeffrey) Hu & Jerry Hausman, 2011. "Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing," Management Science, INFORMS, vol. 57(6), pages 1009-1024, June.
    11. Steven T. Berry & Joel Waldfogel, 2001. "Do Mergers Increase Product Variety? Evidence from Radio Broadcasting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1009-1025.
    12. Andrew Sweeting, 2010. "The effects of mergers on product positioning: evidence from the music radio industry," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 372-397, June.
    13. Erik Brynjolfsson & Yu (Jeffrey) Hu & Michael D. Smith, 2003. "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers," Management Science, INFORMS, vol. 49(11), pages 1580-1596, November.
    14. Georg Götz & Klaus Gugler, 2006. "Market Concentration and Product Variety under Spatial Competition: Evidence from Retail Gasoline," Journal of Industry, Competition and Trade, Springer, vol. 6(3), pages 225-234, December.
    15. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2013. "The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 239-261, February.
    16. David A. Matsa, 2011. "Competition and Product Quality in the Supermarket Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1539-1591.
    17. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    18. Thomas W. Quan & Kevin R. Williams, 2017. "Product Variety, Across-Market Demand Heterogeneity, and the Value of Online Retail," Cowles Foundation Discussion Papers 2054R3, Cowles Foundation for Research in Economics, Yale University, revised Jun 2018.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Argentesi, Elena & Buccirossi, Paolo & Cervone, Roberto & Duso, Tomaso & Marrazzo, Alessia, 2021. "The effect of mergers on variety in grocery retailing," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    2. Elena Argentesi & Paolo Buccirossi & Roberto Cervone & Tomaso Duso & Alessia Marrazzo, 2018. "Price or Variety? An Evaluation of Mergers Effects in Grocery Retailing," CESifo Working Paper Series 7035, CESifo.
    3. Maican, Florin & Orth, Matilda, 2021. "Determinants of economies of scope in retail," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    4. Christos Genakos & Andreas Lamprinidis & James Walker, 2023. "Evaluating merger effects," CEP Discussion Papers dp1921, Centre for Economic Performance, LSE.
    5. Genakos, Christos & Lamprinidis, Andreas & Walker, James, 2023. "Evaluating merger effects," LSE Research Online Documents on Economics 121325, London School of Economics and Political Science, LSE Library.
    6. Néstor Duch-Brown & Lukasz Grzybowski & André Romahn & Frank Verboven, 2023. "Evaluating the Impact of Online Market Integration—Evidence from the EU Portable PC Market," American Economic Journal: Microeconomics, American Economic Association, vol. 15(4), pages 268-305, November.
    7. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2017. "Horizontal mergers and product quality," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(4), pages 1063-1103, November.
    8. Chan, Jackie M.L. & Irlacher, Michael & Koch, Michael, 2022. "Multiproduct Mergers and the Product Mix in Domestic and Foreign Markets," VfS Annual Conference 2022 (Basel): Big Data in Economics 264022, Verein für Socialpolitik / German Economic Association.
    9. Christos Genakos & Andreas Lamprinidis & James Walker, 2023. "Evaluating merger effects," POID Working Papers 072, Centre for Economic Performance, LSE.
    10. Marco A. Marini, 2018. "Collusive agreements in vertically differentiated markets," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 3, pages 34-56, Edward Elgar Publishing.
    11. Nisvan Erkal & Lijun Pan, 2022. "Horizontal Merger Analysis with Endogenous Product Range Choice," ISER Discussion Paper 1162, Institute of Social and Economic Research, Osaka University.
    12. Gabszewicz, Jean J. & Marini, Marco A. & Tarola, Ornella, 2015. "Endogenous Mergers in Vertically Differentiated Markets," MPRA Paper 68318, University Library of Munich, Germany.
    13. Montag, Felix, 2023. "Mergers, foreign competition, and jobs: Evidence from the U.S. appliance industry," Working Papers 326, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    14. Felix Montag, 2023. "Mergers, Foreign Competition, and Jobs: Evidence from the U.S. Appliance Industry," Rationality and Competition Discussion Paper Series 378, CRC TRR 190 Rationality and Competition.
    15. Tiago Pires & André Trindade, 2018. "Ex-post Evaluation of Mergers in the Supermarket Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 473-496, May.
    16. Argentesi, Elena & Buccirossi, Paolo & Cervone, Roberto & Duso, Tomaso & Marrazzo, Alessia, 2016. "The effect of retail mergers on prices and variety: An ex-post evaluation," DICE Discussion Papers 225, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    17. Kim In Kyung, 2020. "Movie Variety and the City," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-26, July.
    18. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    19. A. Yeşim Orhun & Sriram Venkataraman & Pradeep K. Chintagunta, 2016. "Impact of Competition on Product Decisions: Movie Choices of Exhibitors," Marketing Science, INFORMS, vol. 35(1), pages 73-92, January.
    20. Kuehn, Joseph & Lampe, Ryan, 2023. "Competition and product composition: Evidence from hollywood," International Journal of Industrial Organization, Elsevier, vol. 91(C).

    More about this item

    Keywords

    Variety; Assortment; Mergers; Ex-post evaluation; Retail sector; Supermarkets; Grocery;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:espost:279479. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.