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Frontiers in Food Retail Economics

Paper Session

Saturday, Jan. 7, 2023 2:30 PM - 4:30 PM (CST)

New Orleans Marriott
Hosted By: Agricultural and Applied Economics Association
  • Chair: Sandro Steinbach, North Dakota State University

Retail Markups and Discount Store Entry

Lauren Chenarides
,
Arizona State University

Abstract

The first paper, Retail Markups and Discount Store Entry, by Chenarides, Gomez, Richards,
and Yonezawa, studies the effect of entry of one hard-discount format on markups earned by
existing retail stores. The paper focuses on grocery markets in the Eastern U.S. to estimate storelevel
markups using the production-side approach by De Loecker and Warzynski (2012). The
research indicates that the net effect of hard-discounter entry reduces store profitability, regardless
of higher sales realized by incumbent retailers. Such insights are crucial because “hard discounters”
are retail formats that set retail food prices even lower than existing discount formats.
At the same time, they offer limited assortments and focus on store brands, implying that these
formats could significantly change the competitive food retail landscape.

Dollar Store Expansion, Food Retail Competition, and Rural Employment

Keenan Marchesi
,
USDA Economic Research Service

Abstract

The second paper, Dollar Store Expansion, Food Retail Competition, and Rural Employment,
by Lopez, Marchesi, and Steinbach, studies retail competition in rural food markets and measures
the impact of dollar store entry on rural employment. The paper relies on food retail establishmentlevel
data from the National Establishment Time Series for 2000 to 2019 and uses difference-indifference
and event study methods to identify the response of independent retail stores to dollar
store entry. The empirical results show that dollar store entry harms independent food retailers in
rural America. This effect has increased over time, implying that dollar store entry has a delayed
and amplifying adverse impact on independent grocery stores. Such insights are highly relevant
for policymakers and researchers concerned about competition and food policies related to retail
competition in rural America and the impact of dollar store expansion.

The Impact of Dollar Store Expansion on Local Market Structure and Food Access

Matthew Osborne
,
University of Toronto

Abstract

The third paper, The Impact of Dollar Store Expansion on Local Market Structure and Food
Access, by Hollenbeck, Caoui, and Osborne, develops an empirical framework to evaluate the
efficiency of the free entry equilibrium and the impact of entry regulation on spatial market structure.
The model features a dynamic game of entry, exit, and investment into spatially differentiated
locations, allowing for chain-level economies of density. The model is used to quantify the impact
of dollar store entry and subsequent grocery exit on consumer spending and the content and
nutritional quality of consumers’ food baskets. The research offers policy-relevant insights
3 regarding the expansion of discount food retail stores, which has been accompanied by growing
public concern over their impact on local retail markets and food accessibility in local communities.

Estimating Market Power Effects in Farmer Direct Marketing Initiatives

Metin Cakir
,
University of Minnesota

Abstract

The fourth paper, Estimating Market Power Effects in Farmer Direct Marketing Initiatives, by
Cakir, Ibrahim, and Park, assesses the impact of concentration in food retail market on farmers
engaged in direct selling. The paper uses stochastic frontier methods and leverages primary
NASS data from the Local Food Marketing Practices Survey (LFMP) for the 2015 and 2020 surveys.
The empirical work yields markups or the percent by which the output price exceeds marginal
costs. Given the location of each farmer (based on the FIPS code), the estimation will account
for the local food environment and the competitive conditions in the food retailing sector by
merging in TDLinx data. The paper will provide critical insights regarding the impact of retail market
concentration on the direct marketing activities of U.S. farmers.
JEL Classifications
  • A1 - General Economics