Quality Differentiation and Spatial Clustering among Restaurants

Pascal Mossay, Jong Shin and Grega Smrkolj

International Journal of Industrial Organization, 2022, vol. 80, issue C

Abstract: To explore the relationship between spatial location and quality differentiation, we build a dataset of over 30,000 restaurants rated by TripAdvisor, across large UK cities. We document several new stylized facts. Top-rated restaurants tend to be spatially more concentrated around the city center than bottom-rated ones. Whereas top-rated restaurants tend to locate close to other top restaurants, bottom-rated restaurants tend to locate away from each other and closer to top-rated ones. Our theoretical model can explain the main features of observed spatial patterns. Consistently with the predictions of our model, our regression analysis finds that an increase in the population density in the city center is associated with a decrease in the spatial dispersion of both top and bottom restaurants, this reduction being larger in magnitude for top ones. Also, a larger quality difference between top and bottom restaurants increases both the absolute and relative dispersion of top restaurants.

Keywords: Spatial competition; Quality differentiation; Hotelling model; Restaurant industry (search for similar items in EconPapers)
JEL-codes: L13 L83 R12 R32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Quality Differentiation and Spatial Clustering among Restaurants (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:80:y:2022:i:c:s0167718721000916

DOI: 10.1016/j.ijindorg.2021.102799

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