Competition and Product Quality in the Supermarket Industry

David A Marsa, David Matsa

Research output: Contribution to journalArticlepeer-review

107 Scopus citations

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.
Original languageEnglish
Pages (from-to)1539-1591
JournalThe Quarterly Journal of Economics
Volume126
DOIs
StatePublished - 2011

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