Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180297
Authors: 
Argentesi, Elena
Buccirossi, Paolo
Cervone, Roberto
Duso, Tomaso
Marrazzo, Alessia
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7035
Abstract: 
Assortment decisions are key strategic instruments for firms responding to local market conditions. We assess this claim by studying the effect of a national merger between two large Dutch supermarket chains on prices and on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in the merger’s effects, controlling for selection on observables when defining our control group through a matching procedure. We show that the local change in competitive conditions due to the merger did not affect individual products’ prices but it led the merging parties to reposition their assortment and increase average category prices. While the low-variety and low-price target’s stores reduced the depth of their assortment when in direct competition with the acquirer’s stores, the latter increased their product variety. By analyzing the effect of the merger on category prices, we find that the target most likely dropped high priced products, while the acquirer added more of them. Thus, the merging firms reposition their product offerings in order to avoid cannibalization and lessen local competition. Further, we show that other dimensions of heterogeneity, such as market concentration, whether a divestiture was imposed by the Dutch competition authority, and the re-branding strategy of the target stores, are important for explaining the post-merger dynamics. A simple theoretical model of local-market variety competition explains most of our findings.
Subjects: 
variety
assortment
mergers
ex-post evaluation
retail sector
supermarkets
grocery
JEL: 
L10
L41
L66
L81
D22
K21
C23
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.