June, Tuesday  25th 2024

Howard Smith (Oxford University) will present “ The Rise of Discounters and its Impact on Concentration, Market Power and Welfare ”.

Abstract:

In this paper we quantify changes to concentration, market power, and welfare in grocery retailing in Great Britain over 2002-2019. We document that during this period the rapid expansion of two retailers, known as discounters, was associated with a reduction in market concentration at retail and manufacturer levels across the large majority of narrowly-defined product categories.  We develop an equilibrium model that embeds consumer choice over retailer and product and uses a Nash-in-Nash bargaining framework to capture manufacturer-retailer relations, and apply it to the market for breakfast cereals. We show that gains in discounters' productivity, and expansion in their store network and product ranges, lowered market concentration and average prices and raised consumer and total surplus and that lower income households especially benefited.