Wal-Mart Canada places ad in Quebec newspapers to vaunt strength of employees - Moneysense.ca

Quebec isn't the Far West where the cowboy with the biggest revolver can do what he wants.

Wal-Mart is closing a store in Quebec following what Wal-Mart characterized as excessive wage demands by the newly certified worker's union at the store. The Econoclast picked up on the story and reminded us that the consumers who benefit from the always low prices when Wal-Mart comes to town were being forgotten in the debate about the closure. (In the comments of that post I added my two cents that those who were criticizing Wal-Mart over the closure probably were the same ones who fight Wal-Mart's invasion of small town Canada (and America).)

There is another wrinkle to the story: Wal-Mart has lots of stores. And it does want to deter unionization and its spread to other stores. So it will close any unionized outlet where the union's demands reach a certain point. Not because the outlet has become unprofitable, but because the costs of acquiescence are too high.

So, Wal-Mart is playing the role of the cowboy with the revolver. And that's good for consumers interested in always low prices.

For more on reputation building and credible threats see the Milgrom and Roberts classic Predation, Reputation and Entry Deterrence.