Academic journal article Agricultural and Resource Economics Review

Outstanding Master's Thesis Award: The Impact of Wal-Mart Supercenters on Incumbents' Pricing Conduct: The Case of the Dallas/Fort Worth Milk Market

Academic journal article Agricultural and Resource Economics Review

Outstanding Master's Thesis Award: The Impact of Wal-Mart Supercenters on Incumbents' Pricing Conduct: The Case of the Dallas/Fort Worth Milk Market

Article excerpt

As the largest food retailer in the world, Wal-Mart has been a driving force in the metamorphosis of the food-retailing industry. Bringing back the general store format, via its Supercenters, allows it to take advantage of both economies of scale and scope. Due to its expert logistics system, its low-cost mentality, and the sheer size of the company, Wal-Mart has the ability to influence the way in which traditional food retailers, specifically traditional supermarkets, do business.

The aim of this thesis is to empirically quantify the impact of Wal-Mart Supercenters' expansion on the pricing strategies of their competitors and to measure the welfare implications of this expansion through the case of the Dallas/Fort Worth fluid milk market. To achieve this end, a structural oligopoly model of pricing behavior was modified to allow for the potential impact of Wal- Mart Supercenter expansion on the demand facing the incumbents as well as possible mitigating effects on collusion. The theoretical framework was refined into an empirical model consisting of an equilibrium pricing condition and demand equation. …

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