Working Paper

Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart


Jerry Hausman, Ephraim Leibtag

Published Date

16 March 2006


Working Paper (CWP06/06)

Consumers often benefit from increased competition in differentiated productsettings. In previous research Hausman (1997a, 1997b, 1999, 2002) has estimated theincreased consumer welfare from the introduction of new brand, e.g. Apple CinnamonCheerios, and new products, e.g. mobile telephones. In this paper we consider consumerbenefits from increased competition in a differentiated product setting: the spread of nontraditionalretail outlets. Non-traditional outlets, including supercenters, warehouse clubstores, and mass merchandisers have grown in popularity and nearly doubled their shareof consumer food-at-home expenditures from 1998 to 20033. Within this non-traditionalretail group, supercenters have experienced the largest increase over this time period, butwarehouse club stores and dollar stores have also experienced significant increases intheir share of the consumer food dollar as U.S. consumers attempt to find the bestcombination of prices and services at their retailer of choice.