Does reducing spatial differentiation increase product differentiation? Effects of zoning on retail entry and format variety

Sumon Datta () and K. Sudhir ()
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Sumon Datta: Purdue University
K. Sudhir: Yale School of Management

Quantitative Marketing and Economics (QME), 2013, vol. 11, issue 1, No 4, 83-116

Abstract: Abstract This paper investigates the impact of spatial zoning restrictions on retail market outcomes. We estimate a structural model of entry, location and format choice across a large number of markets in the presence of zoning restrictions. The paper contributes to the literature in three ways: First, the paper demonstrates that the omission of zoning restrictions in the extant literature on entry and location choice leads to biased estimates of the factors affecting market potential and competitive intensity. Second, the cross-market variations in zoning regulations helps us test and provide evidence for the theory that constraints on spatial differentiation will lead to greater product differentiation. Finally, we provide qualitative insight on how zoning impacts retail entry and format variety; in particular we evaluate the impact of prototypical zoning arrangements such as “centralized,” “neighborhood,” and “outskirt” zoning on entry and format variety.

Keywords: Product variety; Zoning; Entry; Location choice; Retail competition; Discrete games; Multiple equilibria; Structural modeling (search for similar items in EconPapers)
JEL-codes: C5 C70 L13 L81 M31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s11129-012-9131-x

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