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A Search-Theoretic Interpretation of Multi-outlet Retailers

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  • Prentice, David
  • Sibly, Hugh

Abstract

Why do retailing firms operate several chains of stores, each of which is in apparent competition with the others? This paper demonstrates that by increasing the number of, apparently independent, stores it controls, a firm can discourage consumer search and increase its market power. It is also shown that an increased share of outlets controlled by a multi-outlet firm allows both single-outlet firms and the multi-outlet firm to raise price and thereby increase profit. These results also imply that once the traditional one-firm, one-outlet assumption is relaxed, sequential search models may become unstable. Copyright 1996 by The Economic Society of Australia.

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Bibliographic Info

Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 72 (1996)
Issue (Month): 219 (December)
Pages: 359-69

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Handle: RePEc:bla:ecorec:v:72:y:1996:i:219:p:359-69

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References

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  1. Dudey, Marc, 1990. "Competition by Choice: The Effect of Consumer Search on Firm Location Decisions," American Economic Review, American Economic Association, vol. 80(5), pages 1092-1104, December.
  2. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  3. Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 487-504, July.
  4. Salop, Steven, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 393-406, October.
  5. Marc Dudey, 1988. "Competition by choice," International Finance Discussion Papers 327, Board of Governors of the Federal Reserve System (U.S.).
  6. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  7. Rothschild, Michael, 1973. "Models of Market Organization with Imperfect Information: A Survey," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1283-1308, Nov.-Dec..
  8. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-61, October.
  9. McMillan, John & Rothschild, Michael, 1994. "Search," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 27, pages 905-927 Elsevier.
  10. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
  11. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
  12. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
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Cited by:
  1. repec:ltr:wpaper:1997.15 is not listed on IDEAS
  2. Prentice, David & Sibly, Hugh, 1998. "The Non-robustness of the Nash-Stackelberg-Hybrid Equilibrium," Australian Economic Papers, Wiley Blackwell, vol. 37(4), pages 383-93, December.

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