Dollar Store Entry

• Agricultural Economics Workshop

Date and Location

Thursday, December 2, 2021, 4:10 PM - 5:30 PM
Online Meeting, Zoom

Abstract

Dollar stores have become the fastest growing retail chain in the United States. There is considerable controversy regarding their entry particularly into underserved markets, and concerns that dollar-store entry decisions are motivated by preemptive incentives. In this paper, we aim to study the market-entry of dollar stores as an equilibrium phenomenon, and to examine their impact on competing store formats, and stores from other firms, in a dynamic environment. We use census-tract level data to estimate a dynamic, strategic model of dollar store entry to estimate the impact of dollar store entry on local consumer-welfare, and access to food items. We find that supermarkets and other large-format owners thrive as dollar-store expansion removes their "competitive fringe" in shared markets. Findings from this study suggest that equilibrium location decisions by retail-store owners are complex and policies aimed at subsidizing small-format stores may be counterproductive at addressing food access concerns.