The Wal-Mart Effect

Are Wal-Mart’s Products Normal?

Quoting from Emek Basker in the article.
In this note, I estimate the income elasticity of revenue for Wal-Mart and Target over the last ten years. Because some consumers are likely to view each discounter’s products as normal while others view them as inferior, the aggregate relationship could go either way and depends on the size of the two groups as well as on the magnitude of their elasticities of demand (positive and negative).

I find that demand for Wal-Mart’s products exhibits a negative income elasticity and Target’s demand exhibits a positive income elasticity … For the average consumer, then, it appears that shopping at Target is perfectly normal, but shopping at Wal-Mart is not.

"Given Basker’s estimates, it is probably no surprise that the current slowdown is good news for Wal-Mart, but bad news for Target."

One of the commenters notes that there really aren't substantial differences in price between a Target and Wal-Mart and that one of the reasons people do go to Wal-Mart when the stores are filthy is because they perceive it is a cheaper place to shop and the prices will be lower. When the reality is that its just a filthy store with disgruntled, underpaid and overexploited employees.

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