Empirical Analysis of Competition between Wal-Mart and Other Retail Channels

This paper quantifies the degree of competition between Wal-Mart and different retail channels by exploiting a unique dataset that describes a consumer's choice of store. Using a discrete choice model, I estimate a consumer's choice of retailer in the sales market for DVDs among online, mass merchant, electronics, video specialty, and music stores. Wal-Mart competes more intensely with other mass merchants, and conditional on price and distance, the average consumer still prefers Wal-Mart to most other stores. I also consider a counterfactual experiment regarding the entry of Wal-Mart into 15 proposed store sites into California.