The nature of competition in food retailing units: A Tucson case study Item Type text; Thesis-Reproduction (electronic) Authors Washington, Melvelyn Ronett, 1955- Publisher The University of Arizona. Rights Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. Download date 24/09/2021 03:23:23 Link to Item http://hdl.handle.net/10150/291775 INFORMATION TO USERS The most advanced technology has been used to photograph and reproduce this manuscript from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. 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THIS REPRODUCTION IS THE BEST AVAILABLE COPY. 1 THE NATURE OF COMPETITION IN FOOD RETAILING UNITS: A TUCSON CASE STUDY t>y Melvelyn Ronett Washington A Thesis Submitted to the Faculty of the DEPARTMENT OF AGRICULTURAL ECONOMICS In partial Fulfillment of the Requirements For the Degree of MASTER OF SCIENCE In the Graduate College THE UNIVERSITY OF ARIZONA 19 9 0 2 STATEMENT BY AUTHOR This thesis has been submitted in partial fulfillment of requirements for an advanced degree at The University of Arizona and is deposited in the University Library to be made available to borrowers under rules of the Library. Brief quotations from this thesis are allowable without special permission, provided that accurate acknowledgment of source is made. Requests for permission for extended quotation from or reproduction of this manuscript in whole or in part may be granted by the head of the major department or the Dean of the Graduate College when in her or his judgment the proposed use of the material is in the interests of scholarship. In all other instances, however, permission must be obtained from the author. SIGNED: APPROVAL BY THESIS DIRECTOR This thesis has been approved on the date shown below: (J/c/fd Mol^ Longstreth Dace Assistant Professor of Agricultural Economics 3 DEDICATION To my family, thanks for believing in me. I love you all. 4 ACKNOWLEDGEMENTS The author wishes to express her sincere appreciation and thanks to Dr. Molly Longstreth for her guidance, assistance, and editorial comments during the preparation of this thesis. It was her willingness to give her time, knowledge and patience that gave me the incentive to complete the graduate program. Appreciation is also extended to the thesis committee members, Drs. Roger Dalgren and Neil Conklin, for their constructive comments and suggestions. A special appreciation is extended to my husband, Gary, for his faith and assistance in making a dream become reality. 5 TABLE OF CONTENTS page LIST OF ILLUSTRATIONS 10 LIST OF TABLES 11 ABSTRACT 14 1. INTRODUCTION 15 1.1 Problem Statement 15 1.2 Objectives 19 1.3 Hypotheses 24 2. SELECTED CHARACTERISTICS OF THE TUCSON MARKET .... 27 2.1 Socioeconomic Characteristics 27 2.2 Economic Situation 27 2.3 Regional Characteristics 29 2.4 Tucson Food Retailers 32 Chain Operations 3 3 Independent Operations 37 2.5 Tucson Food Stamp Program 37 2.6 updated Information 3 9 3. LITERATURE REVIEW 41 3.1 Food Retailing History 41 3.1.1 The Chain Store Movement 4 6 3.1.2 The Supermarket Movement 47 3.1.3 The Conglomerate Movement 49 6 TABLE OF CONTENTS — continued page 3.2 Industrial Organization and Its Influence on Price 50 3.2.1 Market structures Studies 52 3.2.2 Market Conduct Studies 54 3.2.3 Market Performance Studies 57 3.3 Defining the Market Basket 61 3.4 Price Dispersion and Influential Factors 65 3.4.1 Ignorance in the Market Place 66 3.4.2 Operating Costs ..... 67 3.4.3 Quality Differences 68 3.4.4 Firm Characteristics 7 0 3.4.5 Competition Level 74 3.4.6 Neighborhood Characteristics 81 3.4.7 Time Considerations 8 6 4. METHODS 90 4.1 The Conceptual Model 90 4.2 Sample Characteristics 91 4.2.1 Selection of Food Retailers 92 4.2.2 Sample Description 95 General Description by Zones 95 General Description by Chain Affiliation . 99 4.3 Market Basket Composition 102 7 TABLE OF CONTENTS — continued page 4.3.1 Selection of Market Basket Items 102 4.3.2 Brand Choice and Missing Values 104 4.4 Definition of Variables and Expected Signs . 105 4.4.1 Firm Characteristics 106 4.4.2 Competition Level ..... 107 4.4.3 Neighborhood Characteristics 109 4.5 Statistical Analysis and Model 113 5. EMPIRICAL RESULTS 117 5.1 Summary of Sample and Variables 117 5.1.1 Sample Statistics 117 5.2 Description of Price Variations 120 5.2.1 Prices With Respect to Geographical Zone . .121 Comparisons between Zones 121 Comparisons within Zones 124 Zone 1 124 Zone 3 125 Zone 4 12 6 Zone 5 127 5.2.2 Prices With Respect to Strata 127 Comparisons between Strata 128 Comparisons within Strata 128 8 TABLE OF CONTENTS — continued page Stratum 1 128 Stratum 2 ...... 130 Stratum 3 131 Stratum 4 132 Stratum 5 133 5.2.3 Prices With Respect to Chain Affiliation . 134 Comparisons between Chains 134 Comparisons within Chains 135 Chain I 135 chain II 137 Chain III 139 Chain IV 13 9 9 5.2.4 Prices With Respect to Time 14 0 Weekly Prices by Zone 14 3 Weekly Prices by Stratum 145 Weekly Prices by Chain Affiliation . 145 5.3 Correlational Analysis 14 8 5.3.1 Correlation between Dependent and Independent Variables 14 9 5.3.2 Correlation among the Independent Variables 149 5.4 Regression Results 151 9 TABLE OF CONTENTS — continued page 5.4.1 Cross-Sectional Analysis 152 5.4.2 Weekly Regression Models ... 160 6. CONCLUSIONS AND IMPLICATIONS 168 6.1 Conclusion 168 6.1.1 Summary of Cross-Sectional Analysis . 168 6.1.2 Summary of Time Series Analysis 173 6.2 Implications . 175 6.3 Recommendations of Future Research 178 APPENDIX A: LIST OF SAMPLE STORES 18 0 APPENDIX B: LIST OF ITEMS SURVEYED AND INCLUDED INCLUDED IN MARKET BASKET 181 APPENDIX C: PRICES WITH RESPECT TO THE ZONE 1 AVERAGE 183 APPENDIX D: PRICES WITH RESPECT TO THE ZONE 3 AVERAGE 184 APPENDIX E: PRICES WITH RESPECT TO THE ZONE 4 AVERAGE 185 APPENDIX F: PRICES WITH RESPECT TO THE ZONE 5 AVERAGE 187 APPENDIX G: PRICES WITH RESPECT TO THE STRATUM 2 AVERAGE 188 APPENDIX H: PRICES WITH RESPECT TO THE STRATUM 3 AVERAGE 189 APPENDIX I: PRICES WITH RESPECT TO THE STRATUM 4 AVERAGE 190 APPENDIX J: PRICES WITH RESPECT TO CHAIN I AVERAGE 191 10 TABLE OF CONTENTS — continued page APPENDIX K: PRICES WITH RESPECT TO CHAIN II AVERAGE 192 APPENDIX L: PRICES WITH RESPECT TO CHAIN III AVERAGE 193 APPENDIX M: PRICES WITH RESPECT TO CHAIN IV AVERAGE 194 APPENDIX N: PRICES WITH RESPECT TO THE WEEK OF THE MONTH (Stores 1-23) .... 195 SELECTED BIBLIOGRAPHY 216 11 LIST OF ILLUSTRATIONS page FIGURE 2.1: Geographical Zones of Tucson 30 FIGURE 2.2: Locations of Food Stores in the Sampling Frame 34 FIGURE 3.1: Size Rankings for Supermarket Formats ... 44 FIGURE 3.2: Model of Spatial Competition 77 12 LIST OF TABLES page TABLE 2.1: Characteristics of Tucson's Geographical Zones . 32 TABLE 2.2: Sample Food Stores in Tucson by Zone . , 36 TABLE 3.1: Size Rankings for Supermarket Formats . 43 TABLE 4.1: Classification and Locations of Sample Stores by Strata . 94 TABLE 4.2: Sample Stores Characteristics , 96 TABLE 4.3: Definition of Variables and Expected Signs < 111 TABLE 5.1: Summary Statistics of All Variables 118 TABLE 5.2: Categorical Variables and Frequencies 119 TABLE 5.3: Zone Frequencies and Percentages . 119 TABLE 5.4: Strata Frequencies and Percentages . 119 TABLE 5.5: Average Prices of Market Basket by Zones 123 TABLE 5.6: Average Prices of Market Basket by Strata 129 TABLE 5.7: Average Prices of Market Basket by Chain Affiliation 136 TABLE 5.8: Average Weekly Prices by Week 142 TABLE 5.9: Average Weekly Prices by Zone 143 TABLE 5.10: Average Weekly Prices by Stratum ...