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The effect of mergers on variety in grocery retailing

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  • Argentesi, Elena
  • Buccirossi, Paolo
  • Cervone, Roberto
  • Duso, Tomaso
  • Marrazzo, Alessia

Abstract

We study a merger between two Dutch supermarket chains to assess its effect on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in pre-merger competitive conditions and thus in the merger outcomes. To define our control group, we account for selection on observables through a matching procedure. We observe that, after the merger, the assortment of the merging parties converges in markets where they are not directly competing one with the other. Instead, the merging parties reposition their assortment to avoid cannibalization in the areas where they directly competed before the merger. While the target’s stores reduce the depth of their assortment when in direct competition with the acquirer’s, the latter increase their assortment. This suggests that variety is a strategic variable in retail chains’ response to changes in local competition.

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  • Argentesi, Elena & Buccirossi, Paolo & Cervone, Roberto & Duso, Tomaso & Marrazzo, Alessia, 2021. "The effect of mergers on variety in grocery retailing," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:indorg:v:79:y:2021:i:c:s0167718721000825
    DOI: 10.1016/j.ijindorg.2021.102789
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    More about this item

    Keywords

    Variety; Assortment; Mergers; Ex-post evaluation; Retail sector; Supermarkets; Grocery;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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