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Entry into Local Retail Food Markets in Sweden: A Real-Options Approach

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Author Info

  • Daunfeldt, Sven-Olov

    ()
    (The Swedish Research Institute of Trade (HUI))

  • Orth, Matilda

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Rudholm, Niklas

    ()
    (Department of Economics, Umeå University)

Abstract

A real-options approach was used, incorporating uncertainty and irreversibility of investments, to study the number of stores entering the Swedish retail food market during the period 1994-2002. It was found that uncertainty affected the entry-decision. Entry was less frequent in highly concentrated local retail food-markets characterized by a high degree of uncertainty, whereas higher profit opportunities seem to have increased the probability of entry.

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File URL: http://hdl.handle.net/2077/2749
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 170.

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Length: 27 pages
Date of creation: 17 May 2005
Date of revision:
Publication status: Published in Journal of Industry, Competition and Trade, 2010, pages 373-387.
Handle: RePEc:hhs:gunwpe:0170

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: Real options; uncertainty; retail food; entry; negative binomial regression;

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References

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  1. Fritsch, Michael & Falck, Oliver, 2002. "New firm formation by industry over space and time: a multi-level analysis for Germany," ERSA conference papers ersa02p486, European Regional Science Association.
  2. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
  3. Sven-olov Daunfeldt & Niklas Rudholm & Fredrik Bergström, 2006. "Entry into Swedish Retail and Wholesale Trade Markets," Review of Industrial Organization, Springer, vol. 29(3), pages 213-225, November.
  4. Asplund, Marcus & Friberg, Richard, 2002. " Food Prices and Market Structure in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 547-66, December.
  5. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
  6. de Juan, Rebeca, 2003. "The independent submarkets model: an application to the Spanish retail banking market," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1461-1487, December.
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Cited by:
  1. Sven-Olov Daunfeldt & Niklas Rudholm, 2009. "Revenues as a proxy for profits: a cautionary note," Applied Economics Letters, Taylor & Francis Journals, vol. 16(7), pages 679-681.

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