Joakim Gullstrand

Christian Jörgensen

AgriFood-Working Paper 2011:3

Local Price Competition: The Case of Swedish Food Retailers

The level of Swedish food prices and the degree of competition within the food supply chain have been debated for many years and generated amongst other things in a number of studies by the Swedish Competition Authority. In this paper our object is to shed some new light on the issue of competition using a detailed dataset covering all food stores in Sweden. By using price data for a large number of stores we have been able to predict prices for all stores. As we have the exact spatial location of all stores we are able to assess the importance of price competition as well as if the market is global or local. Controlling for spatial autocorrelation and endogeneity, the results are unambiguous and show that price competition is substantial but wears off quickly with distance. The price level of the closest competing store within a range of 10 kilometers substantially affects the price level in a store. The price level of a competitor that is distanced with more than 10 kilometers has no impact on a store’s price level. Our results also support that store size, income level and population density are positively associated with price

Se Policy Brief 2011:2 för svensk sammanfattning