Author(s)

P. IVEHAMMAR & J. JERNBERG

Abstract

Grocery stores, especially local stores in rural areas, are decreasing in number. The closure of a local grocery store may be caused by a market failure due to consumers’ inability to coordinate their behaviour. This study develops a questionnaire method to estimate the costs and benefits caused by the closure of a local grocery store. We explain why the closure of local grocery stores is a social dilemma for consumers, and we outline the costs and benefits of such closures identified in previous research. To quantify and evaluate the effects of local closures, we asked all households living in the market area of two recently closed local grocery stores detailed questions about their purchases of groceries before and after the closure of the local store. We also estimated their average willingness to pay to have access to a local grocery store. We present here a cost–benefit analysis for the two studied cases and discuss the ways to sustain local grocery stores.

Keywords

Grocery stores, market failure, transportation costs, willingness to pay, cost–benefit analysis, CVM.