A Search Theory of Retail Market Structure

Jidong Zhou () and Andrew Rhodes ()

No 409, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies how consumer multiproduct shopping and search frictions jointly affect retail market structure. Single-product shops with different products can merge to form a multiproduct retailer. By doing this, they provide one-stop shopping convenience and thus attract more consumers. However, the conglomerate merger also changes the market structure and affects price competition. We fi…nd that an asymmetric market structure with one multiproduct retailer and smaller single-product competitors often leads to the weakest price competition. We solve for the equilibrium market structure, and show that it is asymmetric whenever the search friction is not too high. Conglomerate merger which leads to such an asymmetric market structure often raises market prices and harms consumers. Due to the endogeneity of the market structure, reducing the search friction does not necessarily induce lower market prices and higher consumer welfare.

Date: 2015
New Economics Papers: this item is included in nep-com, nep-ger and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2015/paper_409.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:409

Access Statistics for this paper

More papers in 2015 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().