Supermarket Choice with multi-store shopping: Measuring Market Power and Policy Implications

Abstract

In recent years the growth of the big box supermarket format, with its large stores and product range, has been regulated by UK public policy, with the goal of protecting smaller town-centre stores. Whether this restriction reduces competition - as some have argued - depends in part on how much consumers substitute between large and small store formats. This paper analyzes the effect of planning restrictions using a model in which consumers combine stores in a given shopping period. We estimate the model on a dataset of consumer choices and evaluate the effect - on market power and on town centres - of entry regulation by considering a list of stores that firms wanted to open but that the planner rejected.