Dynamic Spatial Competition Between Multi-Store Firms

Victor Aguirregabiria () and Gustavo Vicentini

Working Papers from University of Toronto, Department of Economics

Abstract: We propose a dynamic model of an oligopoly industry characterized by spatial competition between multi-store firms. Firms compete in prices and decide where to open or close stores depending on demand conditions and the number of competitors at different locations, and on location-specific private-information shocks. We provide an algorithm to compute Markov Perfect Equilibria (MPE) in our model. We conduct several numerical experiments to study how the propensity of multi-store retailers to spatial preemptive behavior depends on the magnitude of entry costs, exit value and transportation costs.

Keywords: Spatial competition; Market dynamics; Sunk costs; Spatial preemptive behavior. (search for similar items in EconPapers)
JEL-codes: C73 L13 L81 R10 R30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-com, nep-geo, nep-mic and nep-ure
Date: Written
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