Competition and dealership agglomeration in new car markets

Ellen Sewell

Applied Economics Letters, 2011, vol. 18, issue 13, 1279-1283

Abstract: The theoretical literature addressing firm agglomeration is rich and varied. Yet few empirical studies have been published. This article investigates the impact of competition on dealership agglomeration in new car markets in the United States. The driving distance between Dodge and Ford dealerships is used as a proxy for the extent of market agglomeration. The number of new car dealers, used car dealers and automotive service facilities are included to measure the extent of competition in the market. Both the land area and the population of the county are used as measures of market size. The geographical dimension for the market is taken to be the county, with counties included in multi-county Metropolitan Statistical Areas (MSAs) excluded from the study. The empirical results provide no support for the expectation that competition drives agglomeration.

Date: 2011
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DOI: 10.1080/13504851.2010.534054

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