Does Reducing Spatial Differentiation Increase Product Differentiation" Effects of Zoning on Retail Entry and Format Variety

Sumon Datta and K. Sudhir ()
Additional contact information
Sumon Datta: Krannert School of Management, Purdue University
K. Sudhir: Cowles Foundation and Yale School of Management, https://cowles.yale.edu/

No 1851, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper investigates the impact of spatial zoning restrictions on retail market outcomes. We estimate a structural model of entry, location and format choice across a large number of markets in the presence of zoning restrictions. The paper contributes to the literature in three ways: First, the paper demonstrates that the omission of zoning restrictions in the extant literature on entry and location choice leads to biased estimates of the factors affecting market potential and competitive intensity. Second, the cross-market variations in zoning regulations helps us test and provide evidence for the theory that constraints on spatial differentiation will lead to greater product differentiation. Finally, we provide qualitative insight on how zoning impacts retail entry and format variety; in particular we evaluate the impact of prototypical zoning arrangements such as "centralized," "neighborhood," and "outskirt" zoning on entry and format variety.

Keywords: Product Variety; Zoning; Entry; Location Choice; Retail Competition; Discrete Games; Multiple Equilibria; Structural Modeling (search for similar items in EconPapers)
Pages: 49 pages
Date: 2012-03, Revised 2012-09
New Economics Papers: this item is included in nep-bec, nep-com, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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