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Chain Stores, Consumer Mobility, and Market Structure

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Author Info

  • Simon Loertscher
  • Yves Schneider

Abstract

Homogeneous products are often sold by chains and locals but the chains charge higher prices. We explain this pricing pattern as well as the empirical fact that chains became increasingly dominant at the same time as consumer mobility increased: Consumers bear setup costs whenever they visit a firm for the first time. A chain operating stores in all locations insures consumers against the need to bear setup costs repeatedly when moving to new locations. In equilibrium, the chain charges higher prices and attracts more consumers than locals. As consumer mobility increases, the chain's market share and profit increases.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 167 (2011)
Issue (Month): 2 (June)
Pages: 236-246

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201106)167:2_236:cscmam_2.0.tx_2-w

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Cited by:
  1. Takaki, Masaya & Matsubayashi, Nobuo, 2013. "Sequential multi-store location in a duopoly," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 491-506.

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