Price competition between big and small supermarkets: evidence from Seoul

Abstract

This article empirically investigates the level of competition between superstores and smaller retailers in the Korean retail industry where market entry and operational hours of the former are restricted in order to protect the latter. Applying spatial econometric methods to storelevel price data from Seoul, we find that while spatial price correlations among same-size stores exist, product prices across different-size stores are spatially uncorrelated. This result implies that consumers may not view superstores’ and smaller retailers’ products as close substitutes, and thus their markets are likely to be segmented from each other.