Does Big Drive Out Small?
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This paper measures the impact of the entry of large supermarkets on incumbents of various sizes. Contrary to the conventional notion that big stores drive small rivals out of the market, data from Tokyo in the 1990s show that large supermarkets’ entry induces the exit of existing large and medium-size competitors, but improves the survival rate of small supermarkets. These findings highlight the role of store size as an important dimension of product differentiation. Size-based entry regulations would appear to protect big incumbents, at the expense of small incumbents and potential entrants.
KeywordsDeregulation Entry and exit Product differentiation Retail
JEL ClassificationL11 L13 L51 L81
I thank Jinyong Hahn, Hidehiko Ichimura, Toshiaki Iizuka, Edward Leamer, Rosa Matzkin, Hiroshi Ohashi, Connan Snider, Raphael Thomadsen, and seminar participants at the University of Tokyo, the 2007 Japanese Economic Association Annual Spring Meeting at Osaka Gakuin University, and UCLA, for invaluable suggestions. I am grateful to the editor, Lawrence White, and the two anonymous referees, for thoughtful comments. I thank Evan Gill, Matthew Khalil Hill, and Maki Komatsu for editorial assistance, Saneaki Obata for industry expertise, and my local supermarkets CSN (small) and Life Extra (medium) for inspiration. Financial support from the Ito Foundation and the Nozawa Fellowship are gratefully acknowledged.
This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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