The effects of retail concentration on retail dairy product prices in the United States

Abstract

This study provides an empirical investigation of the relationship between grocery retail concentration and retail dairy product prices in the United States. The analysis was performed based on a unique data set on store-level retail prices provided by the Information Resources Inc. Further, alternative measures of retail concentration were considered, which included revenue and store selling space-based Herfindahl-Hirschman Index that were computed based on a Nielsen TDLinx data set on store characteristics. Results from a reduced-form empirical framework estimated via panel data techniques indicated that grocery retail concentration had a positive statistically significant effect on retail dairy product prices in the analyzed locations during the analyzed period of time. Specifically, a 10% increase in concentration was found to lead to a 0.46% rise in retail dairy product prices. This central result was robust to the way in which retail concentration was measured and was consistent with broader empirical evidence in the literature on retail market power.