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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 Retail Institute (HUI))

  • Orth, Matilda

    ()
    (School of Economics and Commercial law, Gothenburg University)

  • Rudholm, Niklas

    ()
    (The Swedish Retail Institute (HUI))

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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Bibliographic Info

Paper provided by HUI Research in its series HUI Working Papers with number 1.

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Length: 27 pages
Date of creation: 22 Feb 2007
Date of revision:
Publication status: Published as Daunfeldt, Sven-Olov, Matilda Orth and Niklas Rudholm, 'Entry into Local Retail Food Markets in Sweden: A Real-Options Approach' in Journal of Industry, Competition and Trade, 2010, pages 15.
Handle: RePEc:hhs:huiwps:0001

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

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  1. Fritsch, Michael & Falck, Oliver, . "New firm formation by industry over space and time: a multi-level analysis for Germany," Chapters in Economics, University of Munich, Department of Economics.
  2. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
  3. 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.
  4. Daunfeldt , Sven-Olov & Rudholm, Niklas & Bergström, Fredrik, 2002. "Entry into Swedish Retail- and Wholesale Trade Markets," UmeÃ¥ Economic Studies 599, Umeå University, Department of Economics.
  5. 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.
  6. 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.
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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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