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Dynamic Spatial Competition Between Multi-Store Firms

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  • Victor Aguirregabiria
  • Gustavo Vicentini

Abstract

We propose a dynamic model of an oligopoly industry characterized by spatial competition between multi-store firms. Firms compete in prices and decide where to open or close stores depending on demand conditions and the number of competitors at different locations, and on location-specific private-information shocks. We provide an algorithm to compute Markov Perfect Equilibria (MPE) in our model. We conduct several numerical experiments to study how the propensity of multi-store retailers to spatial preemptive behavior depends on the magnitude of entry costs, exit value and transportation costs.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-253.

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Length: pages
Date of creation: 29 Aug 2006
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Handle: RePEc:tor:tecipa:tecipa-253

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Related research

Keywords: Spatial competition; Market dynamics; Sunk costs; Spatial preemptive behavior.;

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Cited by:
  1. Joao Macieira, 2010. "Oblivious Equilibrium in Dynamic Discrete Games," 2010 Meeting Papers 680, Society for Economic Dynamics.

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