Measuring competition in spatial retail

Paul B. Ellickson, Paul L.E. Grieco and Oleksii Khvastunov

RAND Journal of Economics, 2020, vol. 51, issue 1, 189-232

Abstract: We propose and estimate a spatially aggregated discrete‐choice model with overlapping consumer choice sets and demographic‐driven heterogeneity that varies by chain. Our approach avoids the need to define markets ex ante and captures rich substitution patterns, even in the absence of price data. An application to the US grocery industry illustrates the importance of location, format, and the spatial distribution of consumers in shaping the competitive environment. Contrary to conventional wisdom, we find substantial cross‐format competition between supercenters, clubs, and traditional grocers. Finally, we evaluate two representative mergers between supermarket chains to demonstrate how our estimates inform antitrust policy.

Date: 2020
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https://doi.org/10.1111/1756-2171.12310

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Persistent link: https://EconPapers.repec.org/RePEc:bla:randje:v:51:y:2020:i:1:p:189-232

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