What Drives the Price of a Big Mac? Evidence From Local Market Conditions
Fernanda Alfaro, Scott Loveridge, Dusan Paredes, Mark SkidmoreABSTRACT
Spatial competition is the strongest determinant of Big Mac prices across the United States. Using 10,585 store‐level observations collected in 2023, we examine how local labor market, geographic characteristics, and market structure shape price variation. We find that prices are positively correlated among nearby McDonald's outlets, suggesting limited intra‐brand competition, while the presence of rival chains significantly lowers prices, indicating stronger cross‐brand competitive pressure. Higher wages and unionization rates are associated with higher prices, while higher unemployment reduces them. Urban restaurants charge 2.5%–4% more than rural establishments. Overall, local competitive structure plays a central role in shaping fast‐food prices.