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Streets, Malls, and Supermarkets

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  • Howard Smith
  • Donald Hay

Abstract

We develop a model of competition between shopping centers, comparing competitive outcomes in three alternative modes of retail organization, namely: streets (in which neither developers or retailers internalize agglomeration effects between products); malls (in which developers internalize); and supermarkets (in which both developers and retailers internalize). For a fixed number of centers: (i) converting streets to malls intensifies developer (but not retailer) competition, which increases product range (i.e., the number of shops built by the developers) and consumer surplus, reduces profits, and has ambiguous effects on welfare; (ii) converting streets to supermarkets intensifies retailer and developer competition, has ambiguous effects on product range (number of shops), reduces profits, and increases social welfare. With free entry both conversions reduce the number of centers and, if there is excess entry, conversion to supermarkets (but not malls) unambiguously increases welfare.

Suggested Citation

  • Howard Smith & Donald Hay, 2005. "Streets, Malls, and Supermarkets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 29-59, March.
  • Handle: RePEc:bla:jemstr:v:14:y:2005:i:1:p:29-59
    DOI: 10.1111/j.1430-9134.2005.00033.x
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    File URL: https://doi.org/10.1111/j.1430-9134.2005.00033.x
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    Cited by:

    1. Beck, Jonathan & Grajek, Michal & Wey, Christian, 2005. "Hypermarket Competition and the Diffusion of Retail Checkout Barcode Scanning," CEPR Discussion Papers 5386, C.E.P.R. Discussion Papers.
    2. USHCHEV, Philip & SLOEV, Igor & THISSE, Jacques-François & ,, 2013. "Do we go shopping downtown or in the ‘burbs’? Why not both?," LIDAM Discussion Papers CORE 2013057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Rudkin, Simon, 2014. "Supermarkets versus local shopping: Welfare implications of retail provision mode," Economics Letters, Elsevier, vol. 124(3), pages 396-398.
    4. Jonathan Beck & Michal Grajek & Christian Wey, 2011. "Estimating level effects in diffusion of a new technology: barcode scanning at the checkout counter," Applied Economics, Taylor & Francis Journals, vol. 43(14), pages 1737-1748.
    5. Richards, Timothy J. & Hamilton, Stephen F. & Yonezawa, Koichi, 2018. "Retail Market Power in a Shopping Basket Model of Supermarket Competition," Journal of Retailing, Elsevier, vol. 94(3), pages 328-342.
    6. Brandão, António & Correia-da-Silva, João & Pinho, Joana, 2014. "Spatial competition between shopping centers," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 234-250.
    7. Ushchev, Philip & Sloev, Igor & Thisse, Jacques-François, 2015. "Do we go shopping downtown or in the ‘burbs?," Journal of Urban Economics, Elsevier, vol. 85(C), pages 1-15.
    8. Minten, Bart, 2007. "The food retail revolution in poor countries: Is it coming or is it over? Evidence from Madagascar," IFPRI discussion papers 719, International Food Policy Research Institute (IFPRI).
    9. Tavalaei, M. Mahdi, 2020. "Waiting time in two-sided platforms: The case of the airport industry," Technological Forecasting and Social Change, Elsevier, vol. 159(C).
    10. Productivity Commission, 2008. "The Market for Retail Tenancy Leases in Australia," Inquiry Reports, Productivity Commission, Government of Australia, number 43.
    11. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    12. Tiziana D'Alfonso & Valentina Bracaglia & Yulai Wan, 2015. "Airport cities and multiproduct pricing," DIAG Technical Reports 2015-14, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    13. Bjørn Olav Johansen & Tore Nilssen, 2016. "The Economics of Retailing Formats: Competition Versus Bargaining," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 109-134, March.
    14. DE BORGER, Bruno & RUSSO, Antonio, 2015. "Lobbying and the political economy of pricing car access to downtown commercial districts," Working Papers 2015012, University of Antwerp, Faculty of Business and Economics.
    15. Johansen, Bjørn Olav, 2012. "The Buyer Power Of Multiproduct Retailers: Competition With One-Stop Shopping," Working Papers in Economics 03/12, University of Bergen, Department of Economics.
    16. De Borger, Bruno & Russo, Antonio, 2017. "The political economy of pricing car access to downtown commercial districts," Transportation Research Part B: Methodological, Elsevier, vol. 98(C), pages 76-93.
    17. Ushchev Ph. & Sloev I. & Thisse J.-F., 2014. "Competition between Small Shops and a Large Shopping Center," Journal of the New Economic Association, New Economic Association, vol. 23(3), pages 12-37.
    18. Dai Zusai, 2015. "Market size effects on long-run demand of a network good," Economics Bulletin, AccessEcon, vol. 35(4), pages 2768-2775.
    19. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series 2597, CESifo.
    20. Eizenberg, Alon & Lach, Saul & Yiftach, Merav, 2016. "Retail Prices in a City," CEPR Discussion Papers 11590, C.E.P.R. Discussion Papers.
    21. John Clapp & Katsiaryna Bardos & Tingyu Zhou, 2014. "Expansions and Contractions of Major US Shopping Centers," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 16-56, January.

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