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Measuring competition in spatial retail

Author

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  • Paul B. Ellickson
  • Paul L.E. Grieco
  • Oleksii Khvastunov

Abstract

We propose and estimate a spatially aggregated discrete‐choice model with overlapping consumer choice sets and demographic‐driven heterogeneity that varies by chain. Our approach avoids the need to define markets ex ante and captures rich substitution patterns, even in the absence of price data. An application to the US grocery industry illustrates the importance of location, format, and the spatial distribution of consumers in shaping the competitive environment. Contrary to conventional wisdom, we find substantial cross‐format competition between supercenters, clubs, and traditional grocers. Finally, we evaluate two representative mergers between supermarket chains to demonstrate how our estimates inform antitrust policy.

Suggested Citation

  • Paul B. Ellickson & Paul L.E. Grieco & Oleksii Khvastunov, 2020. "Measuring competition in spatial retail," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 189-232, March.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:1:p:189-232
    DOI: 10.1111/1756-2171.12310
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    Cited by:

    1. Dmitrii Tereshchenko, 2022. "Competition among Russian Grocery Stores: Database on St. Petersburg, 2017–2021," HSE Working papers WP BRP 258/EC/2022, National Research University Higher School of Economics.
    2. Bonfrer, André & Chintagunta, Pradeep & Dhar, Sanjay, 2022. "Retail store formats, competition and shopper behavior: A Systematic review," Journal of Retailing, Elsevier, vol. 98(1), pages 71-91.
    3. Mai, Enping (Shirley) & Ketron, Seth, 2022. "How retailer ownership of vs. collaboration with sharing economy apps affects anticipated service quality and value co-creation," Journal of Business Research, Elsevier, vol. 140(C), pages 684-692.
    4. Pramono, Ari & Oppewal, Harmen, 2021. "Where to refuel: Modeling on-the-way choice of convenience outlet," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    5. Quan Zheng & Honggang Hu & Xiajun Amy Pan, 2023. "Implications of product substitutability in a distribution channel," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1636-1653, June.
    6. Richards, Timothy J. & Chenarides, Lauren & Çakir, Metin, 2022. "Dollar Store Entry," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322100, Agricultural and Applied Economics Association.
    7. MacDonald, James M. & Dong, Xiao & Fuglie, Keith O., 2023. "Concentration and Competition in U.S. Agribusiness," Economic Information Bulletin 337566, United States Department of Agriculture, Economic Research Service.
    8. Cambra-Fierro, Jesús & Gao, Lily (Xuehui) & Melero-Polo, Iguácel, 2021. "The power of social influence and customer–firm interactions in predicting non-transactional behaviors, immediate customer profitability, and long-term customer value," Journal of Business Research, Elsevier, vol. 125(C), pages 103-119.
    9. Li, Jiaqi, 2023. "Predicting the demand for central bank digital currency: A structural analysis with survey data," Journal of Monetary Economics, Elsevier, vol. 134(C), pages 73-85.
    10. Wei Zhou & Zidong Wang, 2020. "Competing for Search Traffic in Query Markets: Entry Strategy, Platform Design, and Entrepreneurship," Working Papers 20-12, NET Institute.
    11. Kapser, Sebastian & Abdelrahman, Mahmoud & Bernecker, Tobias, 2021. "Autonomous delivery vehicles to fight the spread of Covid-19 – How do men and women differ in their acceptance?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 148(C), pages 183-198.
    12. Yufeng Huang & Bart J. Bronnenberg, 2023. "Consumer Transportation Costs and the Value of E-Commerce: Evidence from the Dutch Apparel Industry," Marketing Science, INFORMS, vol. 42(5), pages 984-1003, September.
    13. Gauri, Dinesh K. & Jindal, Rupinder P. & Ratchford, Brian & Fox, Edward & Bhatnagar, Amit & Pandey, Aashish & Navallo, Jonathan R. & Fogarty, John & Carr, Stephen & Howerton, Eric, 2021. "Evolution of retail formats: Past, present, and future," Journal of Retailing, Elsevier, vol. 97(1), pages 42-61.

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