Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

Charles J. Courtemanche, Art Carden

NBER Working Paper No. 17220
Issued in July 2011, Revised in January 2013
NBER Program(s):Health Economics, Industrial Organization

Prior research shows grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers - Costco and Walmart-owned Sam's Club - are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This could be explained by a segmented-market model, or by incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam's Club entry affects grocery stores' prices, consistent with Sam's Club's focus on small businesses instead of consumers.

download in pdf format
   (209 K)

download in epub format
   (304 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17220

Published: Charles Courtemanche & Art Carden, 2014. "Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices," Southern Economic Journal, Southern Economic Association, vol. 80(3), pages 565-585, January. citation courtesy of

Users who downloaded this paper also downloaded* these:
Hausman and Leibtag w11809 Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart
Bresnahan, Davis, and Yin Economic Value Creation in Mobile Applications
Pope and Pope w18111 When Walmart Comes to Town: Always Low Housing Prices? Always?
Neumark, Zhang, and Ciccarella w11782 The Effects of Wal-Mart on Local Labor Markets
Hortaçsu and Syverson w21464 The Ongoing Evolution of US Retail: A Format Tug-of-War
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us