The major structural change in retail markets during the last few decades before the project was started was the entry of large (big-box) stores along with a drastic fall in the number of stores. The most striking example is the expansion of Wal-Mart, which has been found to greatly lower retail prices and increase the exit of retail stores in the U.S., the “Wal-Mart effect”. Retail markets in Europe have also followed the big-box trend, though on a smaller scale, with for example Carrefour, Metro, Schwartz and Tesco. Although there is an emerging literature about retail markets, the impact of this structural change on productivity has not been given much attention. This project dealt with how to measure multi-factor productivity in retail markets and evaluate the effect of entry of large big-box stores on exit and the productivity distribution of incumbent stores in local markets. A central contribution was to provide a dynamic framework for how to consider that stores have market power and compete in local markets. As entry of new stores is regulated, the project had a direct link to competition policy.
The project was financed by grants from the Swedish Competition Authority and the Torsten Söderberg Foundation.