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Ex-post Evaluation of Mergers in the Supermarket Industry

By  |  October 18, 2015

Posted by Social Science Research Network

Ex-post Evaluation of Mergers in the Supermarket Industry Tiago Pires (University of North Carolina) & Andre Trindade (Getulio Vargas Foundation)

Abstract: In this paper we quantify the effects of horizontal mergers in the supermarket sector that took place in the US between 2003 and 2005. We contribute to the growing literature on ex-post merger evaluations in three ways: i) we propose a cleaner identification strategy resulting from the different event dates; ii) we quantify the effects on prices, but also on variety and sales; iii) we show that the estimated effects exhibit heterogeneity and explain part of that heterogeneity with event characteristics.

Our results indicate no effect on the average prices. However, total product variety in a store goes up by more than 1% following a merger and the number of days where products are on sale decreases by roughly 3%. We find important asymmetries when we split the sample into buyer chains and those not directly involved in the events.