Local market definition in competition analysis: An application to entry models

Dieter Pennerstorfer and Biliana Yontcheva

Economics Letters, 2021, vol. 198, issue C

Abstract: This article presents a novel method of market delineation, which generates virtually isolated residential clusters using data on the spatial distribution of the population. The performance of this approach is evaluated by contrasting it with traditional delineation techniques based on municipal boundaries. The estimation of simple entry models for five industries shows that markets defined using micro-level residence information perform better in terms of reducing cross-border spatial spillovers and predicting the equilibrium number of firms on the market more accurately. Additionally, the estimated entry threshold ratios using this method successfully reflect our expectations based on models consisting of geographically isolated markets, as well as ex-ante knowledge about the investigated industries.

Keywords: Market definition; Entry model; Spatial competition; Grid data (search for similar items in EconPapers)
JEL-codes: L11 L13 R32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304389

DOI: 10.1016/j.econlet.2020.109678

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