 Estimating a Model of Strategic Network Choice: The Convenience-Store Industry in OkinawaMarketing Science, 2015, vol. 34, issue 1, 20-38 Abstract: This paper investigates a determinant of location choice for multistore retailing firms: the trade-off between the business-stealing effect and the cost-saving effect from clustering their own stores. I present an empirical model of network choice by two multistore firms. I use lattice-theoretical results to address the computational burden of solving for an equilibrium in store networks. The framework integrates the static entry game of complete information with post-entry outcome data while using simulations to correct for the selection of entrants. I present an application of the model to the case of the convenience store industry in Okinawa Island, Japan, using unique cross-sectional data on store networks and revenues. I use parameter estimates to examine the impact of a hypothetical horizontal merger on store configurations, costs, and profits. Results suggest a retailer's trade-off between cost savings and lost revenues from clustering its stores is positive across markets and negative within a market. I find an acquirer of a hypothetical merger of two multistore firms would decrease its number of stores in suburbs but increase its number in the city center. Keywords: entry; chain; supermodular games; convenience store; merger; retail competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:34:y:2015:i:1:p:20-38 Access Statistics for this article More articles in Marketing Science from INFORMS Contact information at EDIRC. |
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