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A Search‐Theoretic Interpretation of Multi‐Outlet Retailers

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  • DAVID PRENTICE
  • HUGH SIBLY

Abstract

Why do retailing firms operate several chains of stores, each of which is in apparent competition with the others? This paper demonstrates that by increasing the number of, apparently independent, stores it controls, a firm can discourage consumer search and increase its market power. It is also shown that an increased share of outlets controlled by a multi‐outlet firm allows both single‐outlet firms and the multi‐outlet firm to raise price and thereby increase profit. These results also imply that once the traditional one‐firm, one‐outlet assumption is relaxed, sequential search models may become unstable.

Suggested Citation

  • David Prentice & Hugh Sibly, 1996. "A Search‐Theoretic Interpretation of Multi‐Outlet Retailers," The Economic Record, The Economic Society of Australia, vol. 72(219), pages 359-369, December.
    • Handle: RePEc:bla:ecorec:v:72:y:1996:i:219:p:359-369
    DOI: 10.1111/j.1475-4932.1996.tb00970.x
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    References listed on IDEAS

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    1. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
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    8. Dudey, Marc, 1990. "Competition by Choice: The Effect of Consumer Search on Firm Location Decisions," American Economic Review, American Economic Association, vol. 80(5), pages 1092-1104, December.
    9. Michael Rothschild, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown: A Summary," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 1, pages 293-294, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Judy Taylor & Gary Magee, 2017. "In the Aftermath: Consumer Choice and the Deregulation of Australian Retail Banking, 1988–1993," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 57(2), pages 134-157, July.

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