Empirical Games of Market Entry and Spatial Competition in Retail Industries
Handbook on the Economics of Retail and Distribution, Chapter 9, pp 201-233. Emek Basker (editor). (January 2016), Edward Elgar Publishing
40 Pages Posted: 4 Nov 2016
Date Written: February 8, 2015
We survey the recent empirical literature on structural models of market entry and spatial competition in oligopoly retail industries. We start with the description of a framework that encompasses various models that have been estimated in empirical applications. We use this framework to discuss important specification assumptions in this literature: firm heterogeneity; specification of price competition; structure of spatial competition; firms' information; dynamics; multi-store firms; and structure of unobservables. We next describe different types of datasets that have been used in empirical applications. Finally, we discuss econometric issues that researchers should deal with in the estimation of these models, including multiple equilibria and unobserved market heterogeneity. We comment on the advantages and limitations of alternative estimation methods, and how these methods relate to identification restrictions. We conclude with some issues and topics for future research.
Keywords: Retail industries, Market entry and exit, Spatial competition, Econometrics of discrete choice games
JEL Classification: L11, L13, L81, R30
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