Ex-post Evaluation of Mergers in the Supermarket Industry

Abstract

In this paper we quantify the effects of horizontal mergers in the supermarket sector that took place in the US between 2003 and 2005. We contribute to the growing literature on ex-post merger evaluations in three ways: (1) we propose a cleaner identification strategy that results from the different event dates; (2) we quantify the effects on prices, but also on variety; (3) we show that the estimated effects exhibit heterogeneity and explain part of that heterogeneity with event characteristics. Our results indicate no effect on the average prices, but that total product variety in a store goes up by more than 3 % following a merger. We find that the increase in variety after a merger is driven by stores that are not directly involved in the events, for whom the increase is larger than 4 %. © 2017, Springer Science+Business Media, LLC, part of Springer Nature.