Friday, Jan. 6, 2023 8:00 AM - 10:00 AM (CST)
- Chair: Scott Gilpatric, University of Tennessee
What Happens When More Starbucks Cafés Come to Town?
AbstractThis study first uses a theoretical model to illustrate that the increasing market presence of Starbucks cafés has two opposing effects on the demand for packaged coffee products sold in grocery stores, “demand-increasing” and “business stealing” effects, the relative strengths of which determine market outcomes. With weekly scanner data on packaged ground coffee sold in grocery chains, sourced from the Information Resources Inc. (IRI) academic database, along with Starbucks cafés locational data, sourced from AggData, spanning from 2008 to 2012, we then use a random-coefficient logit demand model to empirically examine how these effects influence market outcomes. The estimated structural demand parameters and supply-side equations implied by the assumed price-setting behavior of firms in a Bertrand-Nash competition are used jointly to simulate the new market equilibrium that would result from the counterfactual entry of an additional Starbucks café shop in the local market. We then empirically examine how these effects influence the equilibrium market outcomes. Our empirical evidence reveals that market entry of an additional Starbucks café shop increases the price and quantity sold of a typical Starbucks packaged ground coffee product in grocery chains as well as the price and quantity demand of a typical non-Starbucks packaged coffee product. This finding supports a relatively dominant “demand-increasing” effect in influencing market size of the retail packaged ground coffee products. Furthermore, the welfare analysis suggests a market entry of a new Starbucks café shop in local markets not only benefits individual coffee drinkers but also increases the social welfare. This paper primarily contributes to literature in studying the spillover effects associated with umbrella branding or brand extension as well as advertising literature related to firms’ locational choices.
The Competitive Effects of Data Exchange
Supply Chains, Takeovers, and Market Power
AbstractRising market power can threaten competition and business dynamism, resulting in lower levels of welfare. To date, while much of the empirical work relies on U.S. data, there is scant evidence about the evolution of markups in Europe and the channels through which markups can change. Considering that the number of takeover activities in Europe has steadily increased over time, this study investigates the role of firms’ acquisitions as a driver of change in markups, market shares, productivity and profitability. Interestingly, our results suggest that takeovers aimed at vertical integration strategies result in lower levels of markups of about 2.75%. On the other hand, we do not find significant changes in the case of horizontal integrations after controlling for reverse causality. Thus, in line with the U.S. Vertical Merger Guidelines of 2020, we emphasize the pro-competitive effects deriving from vertical integrations that stem from eliminating frictions on the inputs markets, after reducing double marginalization in the presence of market power.
- L4 - Antitrust Issues and Policies