Retail Markups and Discount-Store Entry

“Hard discounters”are retail formats that set food prices even lower than ex- isting discount formats, such as Walmart and Target. O¤ering limited assortments and focusing on store-brands, these promise to change the competitive landscape of food retailing. In this paper, we study e¤ect of entry one hard-discount format on markups earned by existing stores, focusing several important grocery mar- kets across Eastern U.S. Focusing establishment-level pro tability, estimate store-level using production-side approach De Loecker Warzynski (2012). We nd hard-discounter had expected reducing margins from similar but did not a¤ect stores in same market that are likely appeal a di¤erent segment. general, entry reduced for incumbment retailers 7:3% relative non-entry markets. These results indicate net reduces the overall level store regardless higher sales realized incumbent retailers.