The Price and Profit Performance of Leading Food Chains

Abstract

Abstract The net profits and grocery prices of large food chains were found to be positively and significantly related to market concentration and a chain's relative market share. The results refute the notion that higher profits for dominant firms in concentrated markets are due to efficiency and lower costs. Increased profits in noncompetitively structured markets accounted for about one‐third of the increase in prices. Higher retailer costs in noncompetitive markets appear to stem from inefficiencies and cost increasing forms of competition.