Dynamic Spatial Competition Between Multi-Store Firms

Victor Aguirregabiria () and Gustavo Vicentini

No 10273, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We propose a dynamic model of an oligopoly industry characterized by spatial competition between multi-store retailers. Firms compete in prices and decide where to open or close stores depending on demand conditions and the number of competitors at different locations, and on location-specific private-information shocks. We develop an algorithm to approximate a Markov Perfect Equilibrium in our model, and propose a procedure for the estimation of the parameters of the model using panel data on number of stores, prices, and quantities at multiple geographic locations within a city. We also present numerical examples to illustrate the model and algorithm.

Keywords: Industry dynamics; Spatial competition; Spatial preemption; Store location; Sunk costs; Cannibalization (search for similar items in EconPapers)
JEL-codes: C73 L13 L81 R10 R30 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-com, nep-geo, nep-gth, nep-ind and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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