Local Market Structure and Consumer Prices: Evidence from a Retail Merger

This paper analyzes the effects of a merger between a German supermarket chain and a soft discounter on consumer prices.
We exploit geographic variation in prices within retail chains and brands and use a difference-in-differences estimator to compare regional markets with a change in market structure to a control group in unaffected markets. Our results indicate that both insiders and outsiders raised average prices after the merger, particularly in regions with a high expected change in retail concentration. In contrast, we estimate price declines in regions that did not experience a rise in concentration but were potentially affected by cost savings within the merged entity. We also provide evidence that remedies imposed by competition authorities were not sufficient to offset anti-competitive effects.