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Abstract
The Impact of Wal-Mart Supercenters on Supermarkets’ Profit Margins. XIAOOU
LIU (Email: xiaoou2010@gmail.com, School of Agricultural Economics and Rural
Development, Renmin University of China, Beijing, China 100872) RIGOBERTO
LOPEZ (Professor and Department Head, Department of Agricultural and Resource
Economics, Storrs, CT 06269)
This paper quantifies the impact of Wal-Mart Supercenters on supermarkets’
profitability via a two-stage dynamic entry game, using simulated methods of moment
and milk scanner data from Dallas/Fort Worth supermarkets. The empirical findings
show that the entry of Wal-Mart Supercenters accounts for about an average of 50%
decreases in profit margins for incumbent supermarkets. The effect of scale of economies
is found to be more significant for Wal-Mart Supercenters than for incumbent
supermarkets.