Intra- and Inter-Channel Competition in Local-Service Sectors
AbstractAlthough economically very important, local-service sectors have received little attention in the extensive literature on competitive interactions. Detailed data gathering in these sectors is hard, not only because of the multitude of local players, but also because key service dimensions are hard to quantify. Using empirical entry models, we show how to infer information on these sectors’ degree of intra- and inter-channel competition from the observed entry decisions in different local markets. The approach also controls for relevant socio-demographic characteristics of the trading area that may affect performance. We apply the proposed empirical entry model to the video-rental market. Additional entries of video stores are found to significantly increase the level of intra-channel competition. Unlike the predictions of many normative economic models, we find this increase to be larger when the entry occurs in a duopoly than in a monopoly, a pattern consistent with recent experimental research on collusive behavior in oligopolies. We also find evidence of inter-channel cannibalization from the upstream channel (movie theatres), but not from the downstream channel (premium cable). Finally, various socio-demographic characteristics of the trading zone, such as income and household size, are found to also have a significant impact on store performance.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam in its series ERIM Report Series Research in Management with number ERS-2005-018-MKT.
Date of creation: 30 Mar 2005
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More information through EDIRC
channel competition; empirical entry models; movie industry;
Find related papers by JEL classification:
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- D4 - Microeconomics - - Market Structure and Pricing
- M - Business Administration and Business Economics; Marketing; Accounting
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
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