Entry Regulations, Product Differentiation and Determinants of Market Structure

Florin Maican and Matilda Orth

No 984, Working Paper Series from Research Institute of Industrial Economics

Abstract: We use a dynamic oligopoly model of entry and exit to evaluate how entry regulations affect profitability and market structure in retail. The model incorporates demand and store-level heterogeneity. Based on unique data for all retail food stores in Sweden, we find that the average entry costs for small and large stores are 10 and 18 percent lower, respectively, in markets with liberal compared with restrictive regulations. Counterfactual simulations show that lower entry costs in restrictive markets result in higher entry rates and allow us to quantify the consequences of regulations in light of trade-offs between small and large stores.

Keywords: Imperfect competition; Product differentiation; Retail markets; Entry; Exit; Sunk costs (search for similar items in EconPapers)
JEL-codes: L11 L13 L81 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2013-10-11
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0984

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