Competition and Product Quality in the Supermarket Industry
Top Cited Papers
Open Access
- 1 August 2011
- journal article
- review article
- Published by Oxford University Press (OUP) in The Quarterly Journal of Economics
- Vol. 126 (3), 1539-1591
- https://doi.org/10.1093/qje/qjr031
Abstract
This article analyzes the effect of competition on a supermarket firm's incentive to provide product quality. In the supermarket industry, product availability is an important measure of quality. Using U.S. Consumer Price Index microdata to track inventory shortfalls, I find that stores facing more intense competition have fewer shortfalls. Competition from Walmart—the most significant shock to industry market structure in half a century—decreased shortfalls among large chains by about a third. The risk that customers will switch stores appears to provide competitors with a strong incentive to invest in product quality.Keywords
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