Efficiency determinants in retail stores: a Bayesian framework

This paper analyzes the impact of vertical integration, age, geographic expansion, and low price strategy on the cost efficiency of retail stores. We test our hypotheses using the innovative Bayesian frontier methodology. The data involve a sample of Spanish retail stores that operate in a highly competitive and dynamic environment. From the results, it is clear that cost efficiency is higher for stores that have: longer years in business, stronger geographical presence, and lower price offerings. Vertical integration, on the other hand, is negatively related to efficiency. Further discussions of these findings and related managerial implications are provided in the paper.